August 26, 2020

STOCKS – FB, NFLX, CRM, ROKU

Macro – SPY,

Mike’s Reading The Markets (RTM) Premium Content – NOW WITH A 2 WEEK FREE TRIAL

• An Amazon Drop May Be Coming
• A Monster Hedge Against Several Technology Winners
• Signs Still Point Lower For The NASDAQ
• Lunacy Builds As Analysts Fall Over One Another To Raise Targets
•  Nasdaq Setting Up For Typical 4-5% Correction
• Internals Decline As Risk Assets Diverge
• Pfizer Call Buyers Come Back For Round 2

MICHAEL KRAMER AND THE CLIENTS OF MOTT CAPITAL OWN TSLA

MICHAEL KRAMER OWNS A QQQ PUT

The stage is set for tomorrow before the open when we get Jay Powell. The equity market is looking for more easy money. Average inflation targets seem to be the words of the week, now that yield curve control is out. The market is looking for some signal that the Fed is going to get easier when it has its September FOMC meeting. I don’t see that happening. 

I don’t see how Powell will get up there and say something that hints at a monetary policy change that is likely to take place in September. After all, the economy is on the mend, times are good, that’s what I read at least. Remember, the stock market and the economy have nothing to do with each other. There’s fantasy land, and then there is reality. Why does the Fed need to do more when stocks are at record highs, and corporate and treasury bond markets seem to be more than fine. 

I keep reading about the rise of inflation, after all, isn’t that the reason why Gold and Lumber are soaring. Right? So why in the world would Powell need to introduce something new here to spur inflation, even more, it makes no sense.

Of course, I’m a wise ass. You know why? Because you can’t have it both ways. You can have stock and commodity prices soaring because inflation is coming and everyone is getting ahead of it. At the same time, cry for easier monetary policy to spur inflation. Which one is? Do we need inflation or not?

S&P 500 (SPY) 

The S&P 500 surged again, by another 1%, with the ETF hitting an RSI of 77.3. Meanwhile, the advance-decline continues to decline, and the ETF hit up against the upper end of the trading channel. So these are bearish warning signs. Could it go higher? Of course. Afterall I thought the upside was limited when we were around 3,390, and now we are 2.5% higher. Is this within my average margin of error, yes. So am I wrong, you can decide, it doesn’t matter to me if I get the next to 10 to 15% correct.

I have hesitated to call an S&P 500 break out, for one reason, the chart of the SPY. It never confirmed the break out that the futures and cash market was showing. 

I can tell you that I am not the only one worried about a significant drawdown beginning. Today in the options, there was a significant risk reversal trade I saw across multiple big-cap technology names. I’m not getting into here, because it was complex. Basically someone who is long stocks like Microsoft, Adobe, Amazon, etc. is hedging their positions. (Mike’s premium content  – A Monster Hedge Against Several Technology Winners)

Salesforce (CRM)

How can a company have had one of its best quarters ever and the very next day announce job cuts? Seems strange. Also, did anyone notice how Salesforce just raised their full-year guidance by basically how much the second quarter beat was? Anyway. The stock went up 25%, so what do I know.

Netflix (NFLX)

Netflix went up 10% on NO news today. There was an awful lot of call buying for Friday’s expiration. It seems like one of those Gamma days, where the call buying results in dealers have to buy the stock to hedge, and the more the stock goes up, the more dealers have to buy. The put to call ratio today in the stock was 0.34, lol, the casino was open. 

Roku (ROKU)

Roku was up 11% after Citigroup initiated it with a buy and $180 price target. It stopped where it should around $169.

Facebook (FB)

Facebook rose by 8.6% on NO news. LOL. I mean, this is just ridiculous. I’m sorry. 

What the saying bulls and bears something, something, but pig’s get slaughtered. 

See you tomorrow. 

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.