July 26, 2021

STOCKS – BABA, TSLA, SNOW, TCEHY

MACRO – SPY, EWY, EWH

Mike’s Reading The Markets (RTM) Premium Content – FREE 2-WEEK TRIAL 

• RTM – Is A Major Correction Near?
• RTM – Tales From The Sell-Side 7.23.21
• RTM Tactical Update – A Turning Point For Equity Market’s May Come This Week
• RTM – Buy The Rumor Sell The News?
• RTM Morning – Removing NFLX From Idea List
• RTM – Growth Is Slowing And Multiples Need To Moderate
• RTM Morning: The Perfect Storm
• RTM Video- The Stock Market May Be Ready For A Big Sell-Off

Hopefully, everything makes sense today, I’m having a hard time concentrating at the moment.

Stocks finished the day, mostly higher, with the S&P 500 up around 25 bps. It was a rather quiet day overall, and between the Fed and earnings this week, it is no surprise that the market is just hanging at these higher levels. It should start to get more interesting by Wednesday for a few reasons, the first being that the bulk of earnings will be out of the way and the Fed.

Hong Kong (EWH)

But what nobody is paying much attention to is the carnage that is occurring in Hong Kong. The market there is sinking, and to this point, most of the damage has been contained, but there is a chance it is starting to spread. The HSI gapped lower last night and fell by more than 4%; it almost looks like a breakaway gap. If that is a breakaway gap, then the index should easily fall through support at 26,100 and head lower towards 24,500.

Tencent (700 HK)

This is due to China going on a power grab to control the giant technology companies. Tencent has been hammered, and the stock is down sharply.  Tencent has already fallen through key support and could be heading even lower.

We care because there was a time when stocks like Tencent use to trade along with stocks like Amazon. So either the two are permanently decoupled, or this is a repeat of 2018. It is too early to tell. But as noted yesterday, 2018 seems to be coming up a lot recently. 

KOSPI (EWY)

The South Korean KOSPI is on the verge of its own break lower. We can see the uptrend is already broken, and a further decline would be a bad sign of what’s to come.

Samsung in South Korea is the stock to watch as it teeters on support.

We care about the technology-heavy KOSPI because it too trades similar to our own markets.

Look, you could imagine and easily understand that selling in Hong Kong can move into other Asian markets, and by the looks of things, the markets in Asia are pretty fragile right now. Pay attention; unless you live in a bubble and only look at the S&P 500, not everything is good as it seems.

S&P 500 (SPY)

Speaking of which, the S&P 500 is back at the upper end of the trading range. Perhaps it breaks out; I’m doubtful of that. I am doubtful because all of the momentum trends are telling of a big reversal is coming. It was overbought two weeks, now it is less overbought, and the momentum is beginning to fade. A modest drop back to 4,320 seems possible as a start.

Tesla (TSLA)

Tesla reported great results, and they continue to execute. The bulls and the bears can battle over the gross margin being good enough or not. Not really something I care about. What I care about is that revenue and earnings continue to grow. There is a considerable amount of resistance at $700, and it will be interesting to see what happens once all the gamma built up is released following results.  At this point, the chart suggests a lot of indecision for the stock.

Alibaba (BABA)

Alibaba has just continued to fall, and with everything going on in China, a chart really can’t tell us when the stock will turn around. But for now, it can tell us that critical support was broken today at $200 and that if support at $189 breaks, the stock is probably heading to $168. Staying away may be the best option.

SNOW (SNOW)

I remembered about two or so weeks ago; I thought Snow was going higher to $320. So far, that hasn’t worked out, but the stock hasn’t broken out from its inverse head and shoulders pattern yet again. The momentum is bullish, so the potential there; it just has resistance at $270 it needs clear.

Bitcoin (BTC)

So now Amazon wants to create its own crypto. I really don’t understand any of this. If it is this easy for everyone to create crypto coins, why do any of them have any value? Maybe I’m missing something. Well, with that, Bitcoin reversed lower. Maybe it continues higher to 42,000; maybe it doesn’t. If Amazon is going to have its own crypto, then you think they will let people transact with it, then why do you need Bitcoin or any of the other ones. I still think ultimately Bitcoin goes much lower to 16,000.

-Mike

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