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11.9.20
Stocks – NVDA, ZM, SQ, SHOP, XOM
Macro – SPY, QQ
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- Critical Support Being Tested As Tech Heads Lower
- A Return To Normal Could Send The S&P 500 To 4,000 Over The Next Year.
- I Still Think We Get A Short-Term Retest
- What Does The Dollar Know?
- Stocks Remain Stuck At The High End Of Range
- The Feedback Loop Is Sending Stocks Higher, Vix At Key Support
- A Path To 3800 On The S&P 500 In 2021
- Volality Implodes
- Volatility Collapsing
As a follow-up to my message on Friday, for whatever reason, Google has decided not to serve ads to my website for the past 2 months. I have no idea why, and there is no one to speak to, so I do not know what is going on. So given that, I now make no revenue from the website and have tremendous cost. Therefore, I will no longer be providing an AM write-up. Sorry. Again, I have no control over this, and as much as I love Alphabet as an investment, their customer service sucks.
I provide an AM commentary that comes with an audio update and a transcript to my subscribers. You are welcome to try the service for the first 2-weeks for free. If you love it, great; if not, not an issue; cancel, I won’t bother you.
The day started great and but didn’t end in the same manner in which it started. The S&P 500 surged by more than 3% on Pfizer’s positive news that its COVID vaccine had 90% efficacy, which is amazing. It happens to be much better than anyone expected.
S&P 500 (SPY)
However, the index gave back nearly all of those gains by days end, finishing higher by around just 1.1%, while the NASDAQ 100 QQQ ETF fell by over 2%. I hate to say it, but the vaccine’s news may serve as a selling event. It triggered a massive liquation across many of the technology names many people have grown to love. Many of these technology names are extremely overvalued, which means they can fall a lot before people step in and start repurchasing them. Just consider that.
The S&P 500 gapped higher to start the day but began to fill the gap by days end. It would need to fall back to 3,520 to fill it. I really don’t see a reason why the S&P 500 can’t fall back to 3,310 over the next few days to a week. The vaccine news is great, and no one is more excited than I am, but let’s face facts, there is still plenty of time for that.
NASDAQ (QQQ)
Meanwhile, I think the selling action is just getting going in the Qs. With a vaccine coming down the road, the market will need to reprice all of these technology stocks. Nobody thought Pfizer’s vaccine would be this successful. That means while many of these stocks have a really bright future, it may not be bright enough to justify some valuations.
Additionally, it isn’t likely that the financial sector will rise by almost 8% every day, and the energy sector will jump by over 14% to offset the declines in technology.
Zoom (ZM)
Like take Zoom, the stock fell 17.7%, and it is trading for 36 times 2023 sales estimates. Hey, that’s a lot by anyone’s standard. Maybe it fills the gap higher and goes back to $504, but then again, if it goes below $408, it will probably be $325. The RSI doesn’t even have it oversold yet.
Shopify (SHOP)
Shopify trades for 21.6 times 2023 sales estimates, a bargain compared to Zoom. Great business, a great prospect for the future. Probably should trade for a lower multiple, though. A drop below $910 sets up that drop to $850, which sets up a drop to $740.
Square (SQ)
Square, with its $83 billion market cap, and trades with a 2022 PE ratio of 101.5, and 2022 EV/EBITDA ratio of 75, and a 2022 PEG ratio of 3.6. Again, a great company, a bright future, just very, very expensive. I wouldn’t be surprised if this were back at $162 fairly soon.
Nvidia (NVDA)
Nvidia, which trades for 44.5 times 2023 earnings estimates, a price to sales ratio of 16, and a lot of dilution coming to buy ARM. Again, a great future, but it doesn’t mean the stock isn’t expensive; it absolutely is beyond expensive for a chip company. So if it breaks the uptrend for a second time, is there a good chance it goes back to $460, probably.
Exxon (XOM)
Hey, but Exxon had a great day; I guess people will be driving a little more if you get a vaccine. Hey, but don’t worry now that Exxon rose today and Zoom fell, Exxon’s market cap has passed Zoom once again. Imagine that.
Take care
-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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