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STOCKS – RBLX, SMH, HYG
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MICHAEL KRAMER AND THE CLIENT OF MOTT CAPITAL OWN RBLX
The S&P 500 finished lower today by around 40 bps, with the index finding support multiple times around the 4,110 to 4,115 levels. The index also managed to close below the lower end of the rising wedge pattern, and it looks like the 2b reversal pattern may also be playing out. If the two patterns play out as I expect, we could see 3,950 in the near term.
The IEF/LQD ratio moved higher today and for the first time since July beyond the downtrend. It could be the start of something, and we will need to see a further move higher tomorrow. Financial conditions have eased significantly over the past month, which has acted as a tailwind for stocks. Should conditions begin to tighten, they will serve as a headwind.
Tomorrow’s CPI report will have a big say on whether financial conditions tighten further or not. The estimates are for 8.7% y/y, while the Cleveland Fed estimates that July inflation rose by 8.8%. However, the actual CPI report on a year-over-year basis has come in hotter than the Cleveland Fed estimates every time since the fall of 2021. A hotter than expected CPI tomorrow would come as a shock to the market, which has bet on peak and inflation and a dovish Fed pivot. But a higher than expected number could trigger higher rates and tighter financial conditions.
The HYG may be sending a very subtle message on the matter, as it sits at a support level of around $77.50. Additionally, the RSI has fallen below the uptrend and is starting to trend lower. A break of support at $77.50 probably pushes the HYG to $75.75.
Roblox reported weaker than expected results, and the stock is down sharply. The conference call is not until tomorrow morning, so it will be essential to see what the company says. The company reported solid booking for July, with a return to growth, which is a positive. The $37.75 level is a region of solid support that needs to hold.
The SMH ETF today fell below the 10-day exponential moving average, and in the past, when that has happened, it has not been a good sign and tended to result in the start of a new leg lower.
Finally, bitcoin is very close to a big break lower and out of a bear flag, with a chance to revisit 17,000.
Have a good night.
Charts used with the permission of Bloomberg Finance L.P. 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.