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August 22, 2020
STOCKS – AAPL, TSLA
Macro – SPY, QQQ, RSP, QQQE
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MICHAEL KRAMER AND THE CLIENTS OF MOTT CAPITAL OWN AAPL AND TSLA
MICHAEL KRAMER OWNS QQQ PUTS
The market internals have looked horrible in the last several trading sessions, and if you are not concerned about it, that’s fine. Just don’t be surprised when the Apple and Tesla train slowdown, the markets start to falter.
It is even visible on the chart, when you compare the NASDAQ 100 ETF (QQQ), to the NASDAQ 100 Equal Weight ETF (QQQE). It was on July 30 that Apple announced its stock split, and it was on August 11 that Tesla announced its stock split. We can see the divergence which both occurred during the next trading session.
Also, the number of stocks in the NASDAQ 100 above their 50-day moving average is falling, which is a sign of much of the index losing momentum.
The number of stocks above the 200-day has been moving lower as well.
Certainly, it would seem the effects of these two stocks are helping to influence the direction of the market. Because of the weighting that Apple has in the index, a day like Friday’s is going to affect the overall NASDAQ 100 dramatically. Apple has a 13.8% weighting in the NASDAQ 100 (QQQ) as of July 31, which is up from 11.2% on May 31. Meanwhile, Tesla wasn’t even in the top 10 on May 31; now, as of July 31, it has a 2.4% weight. One can only imagine, given the enormous moves in each, the weightings are likely more significant by now.
So as long as Tesla and Apple keep going up, good things can happen for the broader indexes. If they pause or should start to fall, then the index is likely going to struggle.
I love it that both of these stocks are working, I have owned both for a long time—Tesla since the summer of 2014, and Apple since the summer of 2018. So, trust me, this ride has been great. But I’m also realistic; this won’t last forever.
When you factor in the market internals, it seems to suggest that it has become a two stock show. That isn’t exactly sustainable.
The advance-decline agrees with the argument above. That line has fallen for 5 days in a row.
Anyway, I just thought I’d share these fun facts. Happy Saturday.
-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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