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May 21, 2019 – Stock mentions: Apple, Micron, AMD, PayPal, Citigroup, Banks
Michael Kramer and the clients of Mott Capital own Apple
Stocks continue to bounce around on May 21, this time they went up. It has become a bit of a ping pong game. It would seem that when the markets rise, the Trump administration gets tough on China, and when markets fall, they ease up on China. It is almost as if the President is playing a game of price discovery to see which topics the market cares the most about. If there is no market reaction, the President has the green light to continue the course of action. If the market falls, he reverses policy and moves on to the next topic.
Love it or hate it, that is it feels to me.
Stock Market for May 21 – A Storm Brewing?
S&P 500 (SPY)
Overall the cross-currents for the stock market are strong, and we are entering a significant period. We can see we have two trend lines that are due to cross path on May 23. A rising trend line and falling trend line.
What does that mean? Well, it is kind of like a when a low-pressure weather system and high-pressure system come together you get a storm. Which way will the wind blow?
We can see that both the uptrend and downtrend have offered levels of support and resistance. Meanwhile, the RSI is trying to trend higher, on the four-hour chart, breaking its downtrend. It would suggest to me the S&P 500 is likely to rise above its downtrend, helping to push the S&P 500 on to its next leg higher in the coming day or two towards 2,915.
What could be the catalyst? Well, lost in all the trade noise, you do get the Fed minutes tomorrow at 2 PM. It could give investors some good insight into what the Fed is thinking about regarding the future of interest rate policy.
The VIX index fell below 15, and that is another positive sign that equities are likely to continue to rise. As traders short vol and go long the S&P 500.
Russell 2000 (IWM)
Well, yesterday we were talking about the chance for the Russell to retest its April break out, and to this point that hasn’t happened. However, the one thing to consider is that the index did get to within about 10 points of that trend line on May 13. Is that close enough? It could be.
The one thing that is standing out to me on the chart for the Russell is that there appears to be a double bottom forming around 1,521, a bullish reversal pattern. It would suggest that the index can continue to rise. Additionally, the RSI appears to be trending higher.
I’m obviously not pleased that I am backtracking from yesterday’s bearish view, but I’m trying to call it as I see it, and unfortunately, it feels like things are changing quickly.
Apple had a strong showing on May 21, but the stock still has a lot of work to do over the coming days. There is a clear downtrend in the stock, and the shares closed right on that downtrend. The good news is that Apple is for now at least holding support at $182. As of right now, it is a tough call, but with that downtrend in place and the put activity recently, it is hard to be positive. Maybe that is a good thing. (Here is a premium story I wrote yesterday Apple May Still Fall Further.)
I feel like I keep repeating myself, but AMD still looks positive with the potential to rise to $29.40 and then $31.40 on deck. The chart looks bullish to me; I can’t help feeling that way. So we wait.
Micron is one stock that does not look bullish to me. Micron has two levels of resistance to get through. First, the downtrend, and then a resistance level at $36.40. Good luck.
PayPal looks like it is getting ready to take its next leg higher.
Citigroup doesn’t look very good to me. The stock is struggling at resistance at $66. I think there is a chance for a pullback to around $61. Plus there was bearish betting. (premium content: Here’s Why Citigroup May Be Heading Lower)
I think in general the banks may continue to struggle; there has been a noticeable shift in the yield curve recently that doesn’t favor the banks. I explain it more in this video. Why Banks May Be Heading Lower
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. May 21