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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APRIL 17, 2020
STOCKS – ACAD, GILD, NVDA, FB
MACRO – SPY, IWM, XLK
MICHAEL KRAMER OWNS IWM AND XLK PUTS
MICHAEL KRAMER AND THE CLIENTS OF MOTT CAPITAL OWN ACAD
It like a giant lovefest; everything is right in the world. Oil prices hitting fresh new lows, who cares. Dollar index moves back to 100, ahh what’s the big deal. 10-year yields moving lower, thank the Fed. VIX index still hovering around 40 — it’s like the new 12! 20 million people lose their jobs — no worries, the economy is going to come roaring back.
It is a delusional time that we are living in. Maybe I’m delusional. I never leave my house; I’m homeschooling my two kids. I have two golden retrievers running around. What can I say, the only thing that matters is that nothing matters. The Fed has made everything right in the world. Earnings don’t matter; valuations do not matter. Why even bother trying to invest any more. Just take all your money and stick it in the SPY and forget it. Maybe it has just become that easy.
I read a lot of comments on Twitter about how it’s different this time, and you shouldn’t be fighting the Fed, and there is sooooo much stimulus, which isn’t stimulus. Or this is just a younger generation of portfolio managers, and they just do things differently. People even tell me how the market is forwarding looking, no shit, it’s forward-looking, thanks. Maybe I’m too old at 42, and its time to hang up the jersey. Have things changed that much?
If I remember correctly, I was one of the most bullish people around from 2016 until the middle of March 2020. I took a lot of shit during that time too, because I just wasn’t understanding how bad the economy was, or how Trump was going to destroy the economy, or how the trade war was destroying supply chains. But you know something, I turned out to be right.
It was relatively easy too. All I had to do was figure out the direction of the economy and the trend in earnings, and the market was sure to follow. Now, I can tell you for sure, the economy today is a complete and utter disaster. The Empire State survey had it’s worst reading ever! The Philly Fed, worst reading ever! Industrial production, the worst reading since the mid-1940s! Initial jobless claims, rising at their fast pace ever!
Have you noticed a chart of the Shanghai composite recently? Now since we are following the China model for re-opening the economy, it probably a useful chart to study. But what do I know, I’m just an old-time hack, who traded international markets for seven years. I’m sure all the pro’s trading out of their mom’s basement knows much better than I.
S&P 500 (SPY)
The S&P 500 ran higher into the close on a giant options expiration date and a $3 billion buy imbalance at the end of the day. There is one more gap left to fill at 2,909. It also happens to coincide with a 61.8% Fib retracement level. Pay attention to what happens there. It is also the last meaningful gap left to fill.
I did end up buying some IWM puts the other day, because I might as well. If I’m right, I can make a few bucks. If I’m wrong, well, I’ll only lose a few dollars. Whatever, I’ll put my money where my mouth is. Hey, you know what, that probably means you should do the opposite of what I do because I suck! Oh shit!
I also did the same with a few XLK puts today.
There was an enormous amount to bullish betting in Gildead yesterday before the news article on its drug, image the coincidence. I would be thrilled to hear the drug was successful. But there wasn’t much supportive data in the story that I could feel comfortable. I’m looking forward to getting this virus behind us so that we can have healthy lives again, and my kids can play with their friends and go back to school. For now, $89.30 looks like strong resistance. Free story Someone Was Betting Big On Gilead On April 16
I still think Nvidia is likely to reverse lower. It happens somewhat regularly for a stock to rise and bump above a rising wedge before making its move down. The RSI is flattening out. A drop below $284 sets up a drop to $256 and then $218.
Acadia broke above $48.10 and appears it is on its way to $51.80, fingers crossed.
Facebook has been rising nicely in a channel but has stalled around $181. That is a significant level. The stock needs to break out early next week to avoid a move lower.
Anyway, that’s all for today. I hope you enjoyed it! It sure was fun writing it!
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.