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October 28, 2009
Stocks – MSFT, AMD, NVDA, SQ
MACRO – EWG, SPY
Michael Kramer and the clients of Mott Capital own MSFT
Stocks are falling around the globe as stimulus hopes end, and coronavirus cases surge. We are seeing Germany sink by over 3.3% and is now down about 12% since October 9. The only piece of good news is that the index is likely oversold for the short-term. But otherwise, the index is not sending any positive signals and suggests that the US markets still have further to fall.
S&P 500 (SPY)
The S&P 500 futures are sinking and will need to find some support around the 3,300 level. After that, it is a rather long drop to around 3,200. The futures still could have quite a distance to fall, given the RSI isn’t even close to being oversold.
But with stimulus hopes off the table, and a long dark winter possibly ahead of us, what is the market left to cling to from a bull narrative standpoint? I’m not sure there is much left at this point. The bigger problem is that 3,200 then becomes a very important level of support, with a break of 3,200 confirm a double top pattern in the S&P 500.
Microsoft (MSFT)
Microsoft is trading slightly lower this morning after reporting really good earnings but gave slightly weaker guidance. The biggest problem for the stock as I see it is that at this point it is multiple is too high and needs time to cool off after a big run in 2020. There is nothing wrong with the business, just the stock price is way ahead of itself. It is also telling us that big beats will not be enough this quarter to send stocks up. The stock should find some solid support around $198.
Nvidia (NVDA)
I guess we will find out really soon if Nvidia will break that uptrend. It will be interesting to see how the stock responds. It is sitting right on the trend line this morning, and it won’t take much to see fall.
Square (SQ)
Square is melting, and the stock is testing its 50-day moving average for the time since April. A break of the 50-day and break of support at $162 sets up a drop to $149, and probably a decline to someplace much lower than that.
AMD (AMD)
AMD has gotten a bunch of price target increases today, and I really can’t understand why the issue of dilution doesn’t seem to be coming up. Maybe I’m missing something, or perhaps, the market functions differently today. The company is paying nearly 1/3 of its market cap in stock for a company. That seems like a pretty healthy amount of dilution to me. A break of $75 sets up a drop to $69.50 and then $62.
I’m still shocked Xilinix would agree to an all-stock deal.
Ok, have a good one.
-Mike
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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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