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Stocks finished slightly higher on the day, with the S&P 500 up about 40 basis points, nearly half of which came in the final 30 minutes of trading—there was an approximate $3 billion buy imbalance into the close. Given that tomorrow is the last day of May, some of this activity may be related to month-end rebalancing.
The bigger story today was the ongoing chaos surrounding tariffs. The tariff situation feels never-ending at this point, and it’s unclear how this will ultimately unfold. However, there seems to be a determination to find a path forward. Notably, Section 232 tariffs appear unaffected, meaning pharmaceutical and semiconductor tariffs remain a significant target.
A clear sign that something was wrong with the S&P 500 futures rising following the news was the Taiwan dollar (USDTWD), which continued to strengthen. The Korean won also gained on the day. These two economies are closely linked to semiconductors, and whenever there’s uncertainty around tariffs and trade tensions, movements in these currencies typically reflect sentiment, especially regarding technology.
Initially, we saw the yen weaken against the dollar, but that move reversed around 2 AM. By the end of the day, USDJPY had strengthened by about 45 basis points.
As for the S&P 500, it initially rose higher in the futures market following the news. However, by the opening, most of those gains had faded, leaving the index trading essentially at yesterday’s highs—and notably, still below last week’s peak.
This creates the potential for a “2B top” pattern in the futures—a reversal formation that occurs when prices attempt to make a new high but ultimately fail to close above the previous high. In this case, the futures attempted to take out the highs on May 19.
I’ll take a bigger-than-usual risk here and stick my neck out—even if it means potentially being embarrassingly wrong. More importantly, though, the pattern forming in the S&P 500 strongly resembles the diamond reversal pattern we saw back in January, indicating a potential reversal might be near. Additionally, one could argue that a head-and-shoulders pattern has also developed.
It is the same setup in the Dow.
The pattern is also present in the S&P 500 Equal Weight ETF, RSP.
I’m not sure what the catalyst for a move lower might be—perhaps a hot PCE report tomorrow or an irate “Truth” from the President. Oddly enough, the last time he posted on social media was nearly a full day ago, so after being labelled a “TACO” yesterday and dealing with the court orders, he probably isn’t happy. I know I wouldn’t be.
Finally, Nvidia managed to open above $140 but was unable to maintain those levels. Given today’s rejection at the $140 mark, I’ll be interested to see how things unfold tomorrow. As I noted last night, we probably wouldn’t fully understand the market’s reaction until today’s session concluded—and right now, the path of least resistance appears to be downward.
-Mike
Terms By ChatGPT
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2B Top Pattern:
Definition: A technical reversal pattern indicating a failed attempt to make a new high, suggesting weakening momentum and potential reversal to the downside.
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Diamond Reversal Pattern:
Definition: A technical chart formation that signals potential reversal after an extended trend, characterized by expanding then contracting price swings forming a diamond shape.
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Head-and-Shoulders Pattern:
Definition: A technical chart pattern signaling a potential reversal, characterized by three peaks—the middle one (the head) being the highest, and two lower peaks (the shoulders) on either side.
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Path of Least Resistance:
Definition: The market direction where price movements encounter the least resistance, typically meaning the direction in which prices trend most easily due to lower opposing volume or interest.
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PCE Report (Personal Consumption Expenditures):
Definition: An inflation measure used by the Federal Reserve that tracks changes in prices of goods and services consumed by households, crucial for monetary policy decisions.
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Section 232 Tariffs:
Definition: Tariffs imposed under Section 232 of the Trade Expansion Act of 1962, allowing the President to implement tariffs if imports threaten national security.
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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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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