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Stocks Try To Break Out Again

Dec. 17, 2020 7:05 PM ETDocuSign, Inc. (DOCU), ROKU, SHOP, V, SPY7 Comments
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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. 



Stocks – ROKU, V, DOCU, SHOP

Macro – SPY

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Stocks were mostly higher on the day, with the S&P 500 rising by 58 bps and the Qs rising by 65 bps.

Overall, it might seem as if the index is "breaking out" it hasn't yet. The S&P 500 futures, where most of the overnight activity occurs due to options hedging, have not broken out. The S&P 500 futures are still stuck at 3710ish, and it has been a level that has been difficult for the futures to cross. Remember, most of the gains this year have come overnight, so what happens during the day doesn't matter. The stock market is just a derivative of the options/hedging market.

Perhaps tonight is the night that the futures break out to new highs, but it is where it closes tomorrow afternoon that counts. So again, the momentum indicators are extremely overbought on several levels. One is the number of stocks above their 50-day moving average, which is 85%, again a very high level.

The SKEW index, which is approaching higher levels, suggests increasing tail risks.

Roku (ROKU)

Of course, you have the rampant speculation in stocks, like Roku. The stock went up today on news of HBO Max now being available on the "platform." It was up nearly 8% at one point, adding about $3.2 billion to its market cap. Now, I'm not a rocket scientist, but how does HBO Max add that much in market cap to Roku. Does anyone even know how much Roku is going to make? I don't; they don't tell you. But HBO had total subscriber revenue in 2019 of $5.8 billion. It all makes sense.

DocuSign (DOCU)

DocuSign rose by 4% today; why not. The stock managed to fail again at $247. If it can get over $247, it could probably climb to around $260.

Shopify (SHOP)

It really makes no sense to me why Shopify would rise following news that Amazon may want to build a competing service. You'd think that would worry investors. Not the investors in this stock, they took it up to an all-time high!

Visa (V)

So why does Visa not go up? This stock has been stuck while PayPal and Square have risen to levels that are beyond ridiculous. If Square and PayPal are doing so well, shouldn't Visa be doing as well, if not better? Don't Square and PayPal use the Visa, and for that, Mastercard networks to transact. I know it is all about Venmo and Cash App, that it is a lot of market cap for those two small pieces of the pie. It would be great to see Visa trading at $220 before the year was over; how can it not be trading at an all-time high? Everything else is.



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