View of a mechanical bull machine with nobody

Stocks Rally On October 3, 2022, But Don’t Expect It To Last

This column is my opinion and expresses my views. Those views can change at a moments notice when the market changes. I am not right all the time and I do not expect to be. I disclose all my positions clearly listed on the page, and I do not trade my account on the stocks spoken of in this column unless fully disclosed. If that does not work for you stop reading and close the page. Do not bother me or harass me.

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10/3/22

#STOCKS – $TSLA, $AMZN

MACRO – $SPY, $QQQ, $IWM

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Stocks managed to rally, on Monday, by 2.6% on the S&P 500. It mainly looked to me like short-covering once again. We seem to see these types of moves pretty often, and maybe it turns into something, but I doubt it. I still think we are at the start of wave five down, and today’s rally completed a broadening wedge. The E leg stopped rising basically where it had to.

Additionally, the S&P 500 could only fill half of the higher gap. But there are more telling signs on other market indicators that may be better to look at.

Nasdaq (QQQ)

If you look at the QQQ, we can see that the rally today took us right back to the lower end of the bear flag pattern, where it stopped.

Small Caps (IWM)

Meanwhile, the IWM rose today by 2.65% and only managed to fill the gap at $169.90 and stopped.

The point is that at least these three major indexes and ETFs stopped rising and reversed where they had to to keep the rally from turning into something more. Does that mean we can’t rally higher again tomorrow? Of course, we could rally tomorrow, but if you are bullish, you not only want to see a rally, you want to see the SPX, QQQ, and IWM all gap higher and above those resistance levels. If not, then I think that may be all for now, with another leg down to come.

Tesla (TSLA)

Tesla was down 8% today after reporting delivery numbers that fell short of estimates. It certainly isn’t unusual for Tesla to miss deliveries. But the market didn’t like it and closed below support at $246. At least at this point, $246 will probably become resistance, and the new support level is now at $225.

Amazon (AMZN)

Amazon doesn’t look much different from the QQQ, with the stock hitting up against resistance at $116.40 and the lower trend line of the bear flag pattern. So could it go higher, sure, but again, you want to see it gap over those resistance levels. If not, then this rally is probably over.

Have a good night

-Mike

Charts used with the permission of Bloomberg Finance LP. 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.