Most Shorted Continue To Surge
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.
THE MONSTER STOCK MARKET COMMENTARY
February 1, 2021
STOCKS – COST, WMT, ACAD
MACRO – SPY,
Mike’s Reading The Markets (RTM) Premium Content – FREE 2-WEEK TRIAL
- Earnings Preview: Amazon
- Midday Note: An Uncertain Path Still Lies Ahead
- Morning Note: Volatility Appears To Be Spreading
- Earnings Preview: Alibaba May Fall In The Days Following Results
- T.W.A. – S&P 500 Breaks Major Trend Lines
- 4Q’20 Qrtly Investor Letter: MCM Thematic Growth Portfolio
- Educational Material – The Danger Of Put Buying The Most Shorted
- Earnings Analysis – Tesla’s Lack Of Guidance May Weigh Short-Term
- Earnings Analysis: Microsoft May Become A Victim Of Its Own Success
MICHAEL KRAMER AND THE CLIENTS OF MOTT CAPITAL OWN ACAD
Stocks jumped on February 1, with the S&P 500 rising by around 1.6%, recovering from Friday's losses. It managed to close at 3,775. It's hard to know what today was about. Was it a relief that we survived the weekend with "bad" news, the short-squeeze slowed, or just a flat out technical gap fill? At this point, I'm leaning toward the technical gap fill.
If that is the case, that resistance around 3,775 should continue to hold, and we should see lower prices tomorrow. If that is the wrong call, well, then you will know if the market rallies further.
The most shorted index actually increased by 2.25%, so it wasn't as if the group just stopped rising. Remember that short-interest has about a two-week lag, so while the number of shares short for Game Stop fell to 122%, that is from January 15. The January 29 number won't come until around February 15.
The rally seemed a little surprising because the ISM manufacturing report was worse than expected, and prices paid were much higher than expected. Maybe one month isn't enough to make people worry. It is an inflationary signal and the highest reading since 2011. But still, bonds and equities cared not.
Acadia has really been getting beaten up the last few trading session, and I'm not sure why. They always take a long time to report the first quarter number, generally because they give full guidance. But I also know that the stock typically trades ahead of the news, which makes me worry that someone knows something. Dementia-related psychosis approval news doesn't come until April.
I thought there was a cup and handle pattern, but that is shattered at this point. Right now, we have to hope $44.50 and holds.
Walmart continues to struggle, and as I noted several weeks back, I think the stock will continue to have a tough time moving higher. It just isn't a cheap stock, and the technicals look horrible, with $137 still on target. (Should be free to read - Walmart's Overvalued Stock Is Likely To Struggle Going Forward)
Costco may have formed a head and shoulders reversal pattern, and it appears to be confirmed with a break of the neckline at $359. If that is the case, than a drop back to $334 seems possible.
That's all for today.
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