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2/1/2022
STOCKS – GOOGL, PYPL, AMD
MACRO – SPY, VIX, SKEW
- RTM: Real Yields Fall, Resulting In Market Rally
- RTM: Roblox Update
- RTM Technical Take – End Of Week Short Covering Rally
- RTM: Liquidity Seems To Be Thinning Out
- RTM: Looking For New Lows
- RTM: Fed DUMPS Stocks For Real Economy – Audio
Michael Kramer and the clients of Mott Capital Own GOOGL
Frustrating day for me, that’s for sure. Everything went the right way until an hour before the close. Resistance at 4,525 was holding and then with an hour left, the market ripped higher as the VIX tumbled. The index managed to close at 4,546, finishing higher by 69 bps. There is a massive resistance zone coming up at 4,550 to 4,575, which is the downtrend that started off the January 4 highs. After that, the next level is around 4,620, which is the bottom of the diamond pattern that started at the end of December.
It is not clear to me if the S&P 500 has further to climb or not. From the standpoint of the equity market continuing to rise, it is now doing precisely the opposite of the mantra that took it to this point, which is not fighting the Fed. The Fed is withdrawing stimulus and is on a path to tightening financial conditions, so the move higher appears to be against all of that.
At this point, unless the market pulls back sharply tomorrow, I am going to have to reexamine this more closely because it seems this is still very much a short-covering rally, but it isn’t clear where it stops if it moves beyond the yellow triangle tomorrow.
SKEW
I continue to think that because the SKEW index continues to hardly move, suggesting volatility selling is not taking place. That means the vix is falling due to puts being closed, and with today’s sideways actions, puts would have been losing time value, which would help explain why we saw a rally in the final hour.
TIPS (TIPS)
TIP rates rose dramatically today after the ISM data. That is what made this day so frustrating. The TIP ETF fell by 1% and nearly back to its lows from January 19. The TIP ETF also saw the RSI rise back to the downtrend, which is where it failed to advance. Momentum is very much for the TIP ETF to move lower.
Alphabet (GOOGL)
Alphabet reported results today that were better than expected, and the stock is moving up sharply after announcing a 20-for-1 stock split. The beat on the revenue and earnings was strong, but most of the earnings beat came from their equity portfolio, and their TAC expenses were much higher than expected. In all honesty, I’m surprised the stock is up this strong. TAC was even higher than the highest estimates, and TAC is something most investors care a great deal about. Yes, revenue was much more substantial, but TAC has mattered a lot in the past. So, if these gains were cut in half tomorrow, I would not be surprised; the conference call is likely to shed more light on this.
AMD (AMD)
AMD reported robust results and gave solid forward guidance. There was not much I could find that was wrong with the quarter. The stock is rebounding sharply after hours and testing resistance around $131. I don’t have any opinion on the stock at the moment.
PayPal (PYPL)
PayPal is getting destroyed after giving weak forward guidance. I think the gap at $130 is now in play.
We can see what happens tomorrow.
Mike
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This report contains independent commentary to be used for informational and educational purposes only. Michael Kramer is a member and investment adviser representative with Mott Capital Management. Mr. Kramer is not affiliated with this company and does not serve on the board of any related company that issued this stock. All opinions and analyses presented by Michael Kramer in this analysis or market report are solely Michael Kramer’s views. Readers should not treat any opinion, viewpoint, or prediction expressed by Michael Kramer as a specific solicitation or recommendation to buy or sell a particular security or follow a particular strategy. Michael Kramer’s analyses are based upon information and independent research that he considers reliable, but neither Michael Kramer nor Mott Capital Management guarantees its completeness or accuracy, and it should not be relied upon as such. Michael Kramer is not under any obligation to update or correct any information presented in his analyses. Mr. Kramer’s statements, guidance, and opinions are subject to change without notice. Past performance is not indicative of future results. Neither Michael Kramer nor Mott Capital Management guarantees any specific outcome or profit. You should be aware of the real risk of loss in following any strategy or investment commentary presented in this analysis. Strategies or investments discussed may fluctuate in price or value. Investments or strategies mentioned in this analysis may not be suitable for you. This material does not consider your particular investment objectives, financial situation, or needs and is not intended as a recommendation appropriate for you. You must make an independent decision regarding investments or strategies in this analysis. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Before acting on information in this analysis, you should consider whether it is suitable for your circumstances and strongly consider seeking advice from your own financial or investment adviser to determine the suitability of any investment.
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