Michael Kramer and the clients of Mott Capital own Netflix, Apple, Verizon
The market is on the cusp of something pretty big at the moment, with many of the key index, commodities, and dollar on the verge of big breakouts or big reversals. To say the price action over the next couple of days will be critical is likely an understatement. Be careful….
S&P 500 (SPY, SP500)
Stocks continued their advance on Tuesday with the S&P 500 rising nearly 1%. The index is now up over 2% on the year and likely still has further room to increase before running into trouble at resistance around 2,630. One potential problem is a long-term downtrend which may come into play around 2,600. We will need to continue to watch the situation to decide what happens next. The S&P 500 is around 2,575, therefore, we have about another 1-1.5% before we need to worry.
Coincidence or not, the S&P 500 is on pace to reach that 2,600 level on January 10. That happens to be the Day that Jerome Powell speaks at the Economic Club of Washington D.C. at 12:45 PM.
The S&P 500 did give back most of its early gains in a typical “fill the gap” moment. GAP openings continue to be dangerous until the gaps get filled later in the day.
The Russell had another spectacular day rising about 1.5%. The strong performance is the type of market leadership we want to see. The setup in the Russell is different from the S&P 500. We can see the Russell has room to rise to around 1,433 to 1,453. With the Russell currently around 1,426 make the coming resistance zone critical. The one thing we do not want to see is a divergence between the S&P and the Russell. By that I mean, a Russell that tops out and trades lower, and an S&P 500 that continues to rise.
The housing sector continues to be strong, with the HGX rising to 259. Again, this is likely the most important leading indicator to the broader market at the moment. The housing group led the broader market lower, and so far it has driven stocks higher.
10-Year yields are nearing a significant level if they can manage to rise above 2.73%, which could send them on their way to roughly 2.81%. Meanwhile, the 10-2 spread is shrinking again and back to around 13 basis points. It may trigger those recession worries, yet again. By the way, Atlanta Fed’s GDPNow is tracking the fourth quarter at 2.8%.
Meanwhile, the spread on US and German Bunds is at 2.5% and for the moment has stabilized. A drop below 2.46% sends the spread sharply lower to around 2%, and that is bad news for the dollar, and good news for commodities and multinationals.
Oil is also on the cusp a significant rise or fall as it approaches resistance at $50. An increase above $50 sends Oil on to $54.40, if not, it means the price is going back to the lows.
Netflix continued to rise today and is now at $320. The company reports next week, and it would seem investors expectations for the quarter are rising. The options that expire on January 18, the day after earnings, are suggesting the stock rises or falls by 11.3% from the $320 strike price. It places the stock in a massive trading range of $283 to $356!
But as we know the significant level of resistance that may come first come into play is around a price of $330.
Apple has been slowly filling the technical gap at about $155. For now, that may be all that the move is, a gap fill.
Square is teetering on a break out if can get firmly over the $62 – 63 region. I wrote a more in-depth piece on its earlier today, in a premium article. I think we need to see the stock rise above $66 before getting more positive on the name. Square’s Stock Not Out Of The Woods
Verizon jumped after reporting better than expected wireless subscriber numbers today. That is likely going to set up a retest of resistance at $61. This time the stock will need to break through it.
The shares of Blackberry have managed to fight off disaster by staying above $6.60. That means the stock could likely rise to around $8.75
Adobe could be on its way higher too, about $240 for now.
That’s a wrap
Stocks, stock market, netflix, apple, blackberry, yields, dollar, adobe