Stocks Rise Again On July 21 As Liquidity Wave Nears Its End

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7/21/22

STOCKS – NFLX, AMZN, SNAP

MACRO – SPY, VIX

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The market has increased again today, which has forced me to believe that the rally I thought was coming after the FOMC meeting has arrived earlier than I expected. That largely seems to be due to the arrival and timing of how reserve balances have worked their way into the market in the form of additional leverage.

We saw the same thing happen when March reserves increased by around $200 billion and stocks rocketed in a very violent manner. The reserves have increased by around $200 since June 29, and we now see the same kind of movement in the market, with the violent buying. The problem is we are probably nearing the end of this liquidity run.

Again, the timing of this has tended to be around 2 to 3 weeks, but for whatever reason, this time it has happened in a 1-2 week time frame. So again, I saw the rally coming, but being a week late makes a big difference in this case, and I was late. As you can see though that the next move in reserve balances will be down, so there will be a pullback coming.

VIX

The VIX continues to move lower as well, basically killing my entire theory from earlier in the week. It is moving closer to that uptrend, that has been working for the VIX since November. I also saw implied volatility falling across options in the S&P 500 today as well on an individual, verifying the move lower in the VIX.

SNAP (SNAP)

Snap reported disappointing results and that is sending the stock below $13, and the lower end of the trading range around $12. The chart looked decent a few weeks back, but clearly, the bad results may change that completely if the stock drops below $12.

Amazon (AMZN)

Amazon is approaching an important inflection point at $125. The stock has failed two other times since going back to May.

Netflix (NFLX)

Netflix has almost made it back to resistance at $227, and the RSI approaches overbought levels. The big question is if it can get through that resistance and fill the gap that is up $330.

 

-Mike

Charts used with the permission of Bloomberg Finance L.P.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. 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.