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1/5/2022
STOCKS – ROKU, TDOC
MACRO – SPY, DIA, QQQ
- RTM- The Fed Is Going To Be Much More Aggressive Then The Markets Thought
- RTM: Beware Of Quantitative Tightening
- RTM: Don’t Rush Into The Reflation Trap Yet
- RTM: Evidence Of Further Economic Slowing
- RTM- Topping Patterns – Video
- RTM First Look: Adobe’s Shares May Have Significant Downside Risk
- RTM: An Illusion
- RTM: RISK-OFF WARNINGS
As expected, stocks fell sharply today, erasing nearly all of the Santa Rally in the NASDAQ and about half of it in the S&P 500. I guess nobody read the Wall Street Journal story from yesterday. It was, like I said, a warning message that the language in the Fed minutes would be strong around the balance sheet reduction, and that it was.
So now, the Fed wants to end QE early, wants to raise rates sooner, AND reduce the balance sheet. The market cannot be ok with this, nor should it be. Valuations across the market are too high to support this much monetary tightening. If stocks were to start going back up again, it simply gives the Fed the green light to do what it wants; in a sense, by going higher, it is only making everything worse for itself.
Better still, on January 11, Powell has his confirmation hearing before the Senate. It is unlikely that we hear a Powell that pulls back on his reins, considering as of today, the S&P 500 is in the same spot it was in on December 15.
The S&P 500 could peel off 20% from here and still be at its March 2021 levels. It could drop 28% and return to the February 2020 levels. Do you think Powell is going to blink if the S&P 500 falls, say 15%, or even 20%, probably not? It was easy for the Fed to save the markets in past market pullback cycles, but now with CPI over 6%, it is not that easy anymore.
S&P 500 (SPY)
Today’s decline creates an issue for the S&P 500, as it fell by 1.94% and closed at 4,700. That is below all the highs before the Santa rally and below the November 8 closing high of 4,701. It could easily fall to 4,560 by January 12.
Dow Jones
If the Dow can drop below 36,300 tomorrow, we can make the case that the 2b topping pattern is not dead yet. Sure, it’s on life support, but there is still a chance.
Roku (ROKU)
The carnage was pretty extensive today, with those high-flying stocks with insane valuations getting slammed. Roku, for example, fell by nearly 12% today, and the chart looks pretty horrible. The stock managed to find to support around $197. But once that price goes, we are probably talking about $150. The stock is still insanely overvalued for what it is.
It is funny, to be honest, I went to buy a new TV over the weekend, a Sony, and said to the salesperson can I get a Roku Stick too? And the guy said, why do you need a Roku? This is smart TV; there is no need for a Roku. I laughed to myself and was like, yep, my point exactly. Good luck.
Teladoc (TDOC)
Another one of these stocks is Teladoc, which fell nearly 8%, and is now sitting on support around $86, with a break of support sending the stock to probably around $70. Again, an overvalued stock for what it is. Getting my operation this past summer, it became evident that every patient portal has Tel-medicine on it, nothing special, in my opinion.
Ok, that’s all for now.
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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