Stocks Struggle To Advance On December 29 As Risk-On Fades Away

12/29/20

Stocks – LMND, GME, NVDA, SNAP

Macro – SPY, XBI

Mike’s Reading The Markets (RTM) Premium Content – Get An Extra 20% Off Thru January 1.

S&P 500 (SPY)

Stock’s fell slightly on December 29 by about 20 bps on the S&P 500. More importantly, the index tested yesterday’s opening print on 2 occasions and held. I’m not sure if it matters all that much, but it is worth noting. A break of that level will result in a gap fill back to 3,702.

At least for now, we can consider today’s turnaround as a rejection of the new highs, finishing below yesterday’s closing price. Based on the chart, it seems as if there is a good chance we will see a gap fill before week’s end.

I had mentioned yesterday how the SPY ETF failed to confirm the S&P 500 break out. Today it tried and failed to break out again, and failed, again. What I think is a negative sign for what’s to come.

Biotech (XBI)

The Russell and Biotech, the two big risk parts of the market, did not perform well. With the Biotech ETF (XBI) now down 7% this week alone. The ETF broke two major uptrends and is clinging to support around $142.70. A break of that support sets up what could be a drop to around the 50-day moving average at $130.

Lemonade (LMND)

Lemonade was up today, despite the lock-up period ending. Volume today was not noticeably different, which suggests there hasn’t been any selling of shares from the expiration date. It could be they are merely waiting until the new year for tax purposes? I’m not sure we will be watching tomorrow to see if there is a pick-up in volume.

You can see the RSI broke its uptrend, and I think that means we ultimately see lower prices. (Should be free to read- Lemonade’s Stock Declines May Have Only Begun)

Snap (SNAP)

Snap rose today after getting a Goldman Sachs price target boost to $70 from $47. That price target assumes a lot of good things go Snap’s way. The stock made it to resistance around $53.75, its old highs, and just failed. A move back to $47.35 doesn’t seem so crazy over the short-term. (Should be free to read- Snap’s Soaring Stock May Be About To Burn Out).

Gamestop (GME)

Not a good day for Gamestop, with the shares plunging by nearly 8% on no news. The borrow rate and the implied volatility levels have subsided some, but not enough, in my opinion. The stock failed at resistance around $22.65 twice over the past few days, not a great sign. Today the stock bounced right off support that I noted around $18.65. The big problem is that there is still a gap to fill around $15.50. It will likely get filled over the next few weeks. The RSI still has much further to g, before getting too oversold.

Nvidia (NVDA)

Nvidia is getting close to the big crack. We have been talking about $460 for a really long time. I still think it comes, and probably sooner than we think.

Ok, good night!

-Mike

Mott Capital Management, LLC is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and, unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Past performance is not indicative of future results.