The Momentum Trade Driving Stocks Higher May Be About To Snap

This column is my opinion and expresses my views. Those views can change at a moments notice when the market changes. I am not right all the time and I do not expect to be. I disclose all my positions clearly listed on the page, and I do not trade my account on the stocks spoken of in this column unless fully disclosed. If that does not work for you stop reading and close the page. Do not bother me or harass me.

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MAY 27, 2020

STOCKS – FB, AMZN, MU, CRM, AAPL

MACRO – SPY, QQQ

MIKE’S READING THE MARKET PREMIUM CONTENT – 

MICHAEL KRAMER AND THE CLIENTS OF MOTT CAPITAL OWN AAPL

Well, it was another exciting day in the world of the stock market.  We had a repeat of what happened at the end of day Tuesday, and the reverse of what happened yesterday, with the S&P 500 falling by 1.5% from peak to trough, in the final hour. It was worse for the NASDAQ falling by 2%. The amount of volatility in the equity market seems to be getting a little bit out of hand, and I can only wonder what this is setting us up for, likely something not good is brewing.  

There is a very curious trade that is happening in the market and is not as easy as the market is going up on hopes of a V-shaped recovery. It is much more detailed than that, involving Algo’s, options traders, and dealers driving just one massive momentum trade, and when it breaks, it is likely to result in some significant pain. I’m am by no means saying it will result in a retest of the lows, but it doesn’t mean we can’t peel off 10 to 15% very quickly when the trade finally snaps. I reviewed it all in a video today – premium content  Thinking About Where Stocks Go Next

The S&P 500 does have a mini-uptrend, which, if broken, could result in a decline to around 2,950 or 2,900. The upside is limited to approximately 3,115.

S&P 500, spx

Copper

Copper is starting to trend lower, and we need to watch this very, very carefully. 

copper

NASDAQ (QQQ)

For some reason, copper seems to have something in common with the NASDAQ Qs. So, where copper goes may tell us about the future of the momentum trade.

qqq,

Apple (AAPL)

Apple still looks weak to me, and today I saw a pretty big option bet suggesting shares move lower. For now, I think $295 is the next stop.  Premium content – Options Bet Indicate Apple May Drop Soon

apple, aapl

Salesforce (CRM)

Salesforce is falling after giving what I thought was disappointing guidance. As long as the stock holds support at $172, all should be well. If it breaks $172, look for $165.

salesforce, crm

Micron (MU)

Well, Micron didn’t break out today, and instead failed at resistance for a third time, not good. So we could have a triple top pattern forming or a head and shoulders pattern. Either way, they are both bearish and indicate that shares fall. We need the stock to fall below $42 to know for sure. 

micron, mu

Facebook (FB)

I’ll repeat it, just in case you might have forgotten. I still think Facebook is heading to $191. 

facebook, fb

Amazon (AMZN)

Just in case you forgot, I think Amazon is going to $2,285, with incase odds of a drop to $2,100. 

-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.  

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