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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Why Stocks Fell Today and Why Tomorrow Is Even More Important
MICHAEL KRAMER AND THE CLIENTS OF MOTT CAPITAL OWN SHARES GOOGL, NFLX, ACAD, MA
Why did the stock market go down today?
Today’s sell-off in stocks was more about yields than anything and just how long yields continue to rise is the question. It may be over by tomorrow. That is when we find out the job numbers for September and most importantly how much wages rose. Let’s not waste time trying to figure what will happen tomorrow because we can not control the outcome and at this point, it frankly does not matter.
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We can see that rates on the 10-year broke out and are nearing a resistance level in the 3.20 to 3.25% range. So that is one reason tomorrows results are so significant. A strong job number and hot wage growth could quickly send yields higher. But a weak number could quickly reverse this trend and get stocks to settle down.
The big concern here for equity price is the potential impact higher rates can have on stocks. Overall, if rates continue to rise stocks with high earnings multiples could take a rather big hit. Higher interest is bad for multiple expansion because investors are not as growth-starved. This is one of thing I worried about and mentioned as red flag back in September. Are Red Flags Emerging For Stocks? Plus AMD Breaking Down
Moving on to the S&P 500
Support in the S&P 500 is now around the lower uptrend between 2,850 to 2,870.
Amazon shares fell by more than 2.2% today and for now, found some support around $1,900. Again, we have talked about $1,840 for some time and that outcome could arrive as early as tomorrow at this pace. Another reason tomorrow becomes an important day.
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Netflix was another stock that took a significant hit. $357 is an important level of support for the stock.
Roku fell hard again today and continues to work towards support around $64.90.
Alibaba is now back at its 2018 lows around $151. I cautioned patience yesterday, and I still think that is the case. I will continue to monitor this closely. It needs to hold this level or we could be looking the low $140’s.
MasterCard fell hard today, I think it still has further to go. Probably to around $210 to $212.
Even Alphabet got hit hard but for now, it is holding firm at support around 1,170. Again, this a very important level.
The bad news for Facebook keeps getting worse. The stock fell below support at $159.50, and closed below support. If it can’t get above that price tomorrow, the shares have much further to drop.
So Acadia went up by about 1.5% on a day that the XBI Biotech ETF and IBB Biotech ETF with both down about 3%? Interesting to say the least. Most of the rally occurred at during the afternoon session.
Well at least the banks rallied today, right? I mean they got right up to resistance and failed miserably. Perhaps investors don’t believe the yield curve will continue to widen.
That is it for today.
Michael Kramer is the Founder of Mott Capital and the creator of Reading the Markets.
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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.
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