October 19, 2020

STOCKS – AMD, MU, WDC, NFLX

Macro – SPY,

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Macro Headlines: 

• Are Stocks Lossing Faith?
• Stocks Will Try To Recover Friday’s Declines – Morning
• Themes For The Week Of October 19
• Sector Rotation Turning Defensive
• Biden’s Lead Is Narrowing Over Trump

Stock Specific:

• Exxon’s Stock May Be Heading For A Reversal Of Trend
• Micron’s Shares May Jump 9%
• PayPal May Surge With The Market, But Not Without Risk
• Intel’s Stock Is Breaking Out

 

Stocks sold-off today as stimulus headlines suggested no progress had been made. Again, my base case has been that there will be no stimulus deal before the election and that the market will likely be led by that these headlines. However, I believe that there will be enough positive talk to keep the market afloat until after the election.

S&P 500 (SPY)

The S&P 500 fell by about 1.6% today but managed to hold above support around 3,425. This is an important level for the index to maintain, as it acted at tough resistance before breaking out on October 8. A break of support at 3,425 could be led to a decline to the 50-day moving average around 3,400 or the next major support level at 3,340.

For the moment, I continue to think the market will see higher prices up until the election. Today’s drawdown could merely be a retest of the breakout we saw on October 8.

Call volumes remained fairly strong today, although we did see a bit of an uptick in implied volatility, which is not surprising given the move lower in stocks. But remember, the higher the implied volatility levels go, the more expensive the pricing on call options get, which will dampen volume in the future.

10-Year

Interestingly, the bond market is not buying the stimulus deal news, with yields rising today, despite the sharp drawdown in stocks. 

Dollar  

The dollar was weaker too. So no flight to safety, and certainly not the same panic in Treasuries or the dollar, as in equities.

Micron (MU)

Micron jumped today by over 2% on reports that Intel would sell its NAND business. The stock tried to break out on the news, but the selling in the overall market was too great for it to overcome. Still, I think it will continue to head higher. (premium content from October 15 – Micron’s Shares May Jump 9%). 

Western Digital (WDC) 

Western Digital also jumped on the news, just barely clearing resistance at $40.80, with a good chance to head back to $44.50.

AMD (AMD)

AMD continues to slip, and today was the first uptick in volume levels, which may suggest more sellers are coming in. Nothing changes here; $75 is the next level to watch for.

Netflix (NFLX)

Netflix doesn’t have the greatest look on the chart, and the RSI is just going the wrong way. I’m beginning to wonder if that is a double top forming. I think they disappoint tomorrow, as they have pulled so much growth forward. I’m looking for $495. (Free story on Forbes – Netflix Stock May Face Lower Price Amid Strong Quarterly Results)

Ok, have a good one!
-Mike

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