This is Why The Stock Market May Rebound on December 6

MICHAEL KRAMER AND THE CLIENTS OF MOTT CAPITAL OWN SHARES OF AAPL, NFLX, GOOGL, TSLA, ACAD, MA

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I’ll tell ya what, you would have never known that NASDAQ fell nearly 4% on Tuesday or that the S&P 500 fell 3.25% based on the trading in international markets today. The Shanghai Composite fell just 60 basis point! Yeah, 60 basis points!. The Hong Kong Hang Seng Index fell 1.6%, the Japanese Nikkei fell only 0.5%. Certainly, the major Asian market didn’t feel the effect of the steep sell-off.

Europe was harder hit with the German DAX falling 1.2%, and the UK FTSE down 1.5%. The sell-off certainly seemed to hit Europe a tad bit harder than Asia, adding some further support to my Brexit triggered equity market sell-off here in the US.

What Next?

But perhaps more important it is that it also proves that the sell-off is likely not something that will persist when the market’s in the US opens on Thursday. I think we probably see a rebound before the end of the week and continue on our uptrend higher, which we so nicely established since November 23.

The chart below shows that the RSI is trending higher even with the steep decline yesterday. It continues to suggest to me the S&P 500 continues to move higher.

Apple

Apple broke out on Monday rising above a downtrend, and despite it, sharp Tuesday sell-off remained above downtrend. Additionally, the relative strength index is now starting to trend higher and has broken free of its recent downtrend. But perhaps more important is that tomorrow after the close of trading Broadcom will report results. Broadcom is a major Apple supplier and what Broadcom says about its Wireless business will carry a great deal of weight on the direction of Apple.

Amazon (AMZN)

Amazon also broke free of its downtrend on November 30, and despite yesterday’s sell-off continues to stay above that trend. Another positive sign that Amazon can continue to rise from its current price.

Alphabet (GOOGL)

Alphabet like the other also remains above a downtrend. Additionally, its RSI continues to rise as well.

Netflix (NFLX)

Netflix has a bullish formation in its RSI too.

Mastercard (MA)

The same happened in Mastercard – holding the downtrend support.

Chips

We can see a similar pattern as discussed in Semiconductor ETF the SOXX.

Biotech (XBI)

The XBI Biotech ETF as well. That RSI has cleared a downtrend and continued to rise.

Intel (INTC)

Intel fell below support $49, but it still holds its uptrend and the RSI continues to trend higher as well.

Tesla (TSLA)

Tesla was actually up on Tuesday, a fantastic feat. But again this stock continues to hang around resistance at $360, and I continue to believe this one is going higher. In fact, According to data from TradeAlert, Tesla saw an increased level of options activity at the January 2019 $400 calls. The open interest for the calls rose by 12,100 contracts on December 4, bringing the total number of open contracts to 24,542. The contracts trade at roughly $8, and for a buyer of those calls to earn a profit the stock price to rise 15% to $408 from its price of $356 on December 3. The increase in the open interest is large and worth about $9.6 million.

Acadia (ACAD)

Acadia should get a boost tomorrow; the Baker Brother disclosed they now own 39.8 million shares or 27.7% of the company. That is up from 28.4 million shares or 22.7% of the company. The chart is messy, but the RSI continues to trend higher.

10-Year

Finally, the 10-year yield fell below its long-term uptrend, and the rising wedge pattern suggests yields on the long-end continue to fall. We may see a rise back to around 3% first, but I think we may be on way to around 2.6%. Yes, you read that right. When you see those November PPI and CPI reading you will understand.

More tomorrow in the morning commentary.

-Mike

Michael Kramer publishes independent macro and options research read across 10+ platforms and by institutional desks. For research syndication, licensing, or consulting inquiries, visit michaeljkramer.com.

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