The Herd Is Running Right For The.
Growth, Long/Short Equity, Momentum, Macro
Seeking Alpha Analyst Since 2014
I am Michael Kramer, the founder of Mott Capital Management and creator of Reading The Markets, an SA Marketplace service. I focus on long-only macro themes and trends, look for long-term thematic growth investments, and use options data to find unusual activity.
I use my over 25 years of experience as a buy-side trader, analyst, and portfolio manager, to explain the twists and turns of the stock market and where it may be heading next. Additionally, I use data from top vendors to formulate my analysis, including sell-side analyst estimates and research, newsfeeds, in-depth options data, and gamma levels.
July 9, 2020
STOCKS – NVDA, SHOP, AMZN, ZM
MACRO – SPY, QQQ
Mike Reading The Markets Premium Content – $35/Month or $300/Year
- Afternoon Repo To Determine Direction- Midday
- Downwards Trends Remain
- Markets Setting Up For 5-6% Dip
- Downwards Trends Remain
- Nvidia Is Priced For Perfection, May Have Topped Out?
- Stocks Trying To Breakout Ahead Of Data
Stocks had a volatile trading session falling by about 60 basis points on the S&P 500 while the Nasdaq rose by 84 basis points. It seems relatively apparent how there is a massive herd-like mentality taking place in the market, with everyone just rushing to a handful of names. It is terrifying to be honest because the ending will not be good, and there will a lot of damage on the way lower. People will unsuspectingly think they are getting bargains when a stock like SHOP is trading at $800, only for them to go even lower. It happens, a lot, I have seen it happen a lot, it is an unforgiving process. I use to trade some of the biggest momentum growth orient names when I was on the buy-side desk. The unwinding process is brutal.
No matter how you describe it, the NASDAQ Qs are trading at the upper end of the range, and as I have noted five prior times, every time it gets to this point, it pulls back sharply. I said this the other day, for subscribers and even pointed out some bearish betting in the QQQs. So I am looking for a pullback to around $245 at the moment. Premium content - Markets Setting Up For 5-6% Dip
S&P 500 (SPY)
There is a substantial level of resistance at the downtrend in the S&P 500 around 3,180. Meanwhile, the RSI is trending lower still, while the advance-decline is also now beginning to turn lower as well. Both bearish momentum indicators.
50-Day Moving Average
The number of stocks above their 50-day moving average in the S&P 500 has fallen sharply, and could even be heading lower.
Meanwhile, the number of total stocks above their 20 days moving average is now down to 42%. It confirms the view that there are just a handful of stocks driving the Q insanity.
Meanwhile, what may be even more critical is that 10-year is now attempting to break support around 63 basis points, and if that happens, it will signal a further decline for yields. Think Risk-off
Nvidia is perhaps one of the scariest stocks leading the charge because there is no fundamental underpinning to the move higher, and it is likely to end disastrously as well. The stock is now trading on the other side of the rising wedge and has an RSI over 70. I still think the stock pulls back to $350. Premium content - Nvidia Is Priced For Perfection, May Have Topped Out?
Amazon has gone vertical, and if there is any company that is likely to disappoint investors when they report results, it is Amazon. We have been there and done that. I still think it heads back to $2460.
I still think Zoom goes back to $225.
There is no reason why SHOP can't go to $750 or lower. It is expected to have $4 billion in revenue in 2022; even if that number $16 billion, the stock is overvalued; the company has a $120 billion market cap. Fundamentals always matter, don't be fooled.
Meanwhile, the Fed's balance sheet fell again this week. Uh-oh.
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