8 Monster Charts For The Week Of March 22
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.
MARCH 21, 2021
STOCKS – AMZN, ROKU, AMD, DE, FCX
MACRO – SPY, QQQ, VIX
Mike’s Reading The Markets (RTM) Premium Content – FREE 2-WEEK TRIAL
- T.W.A - Past The Point Of No Return?
- LIVE STREAM WILL START AT 1 PM ET
- Apple’s Recent Decline Isn’t Over Just Yet
- Morning Note: Expect A Wild One
- Live Stream On 3.19.21 1 PM ET
- MIDDAY – Volatility Is Going To Pick Up In A Big Way
- Morning Notes: Rates Are Only Beginning To Climb
- FOMC: Uber Dovishness From Fed Likely To Drive Rates Even Higher
- Midday Note – It’s Show Time
- Morning Note: The Question Isn’t What Powell Will Do, But Who He Fears The Most
- Midday: Massive Options Bets Suggest Volatility On The Way
The week of March 22 will be much more volatile, if nothing more, but than for the fact that options expiration was last week. The week following the major opex of the month always seems to carry more volatility, and that is because the options positioning in the market declines, so sharply, it provides, in a sense, less gravity for prices to center around. Considering the amount of open interest the options market generates compared to the past, the volatility in these "modern times" seems much higher. (Premium content on SA Marketplace -Reading The Markets T.W.A - Past The Point Of No Return?)
You can almost see the peaks and troughs in the S&P 500 when lined up against the open interest dips. Is it perfect? No, but it may be perfect enough that a drawdown this week should not come as a surprise until open interest levels start building again.
S&P 500 (SPY)
This does, after all, make this region in the S&P 500 the perfect candidate for a peak in the index. The chart below is stunning; potentially having completed another 5 wave count, the Fibonacci retracement levels of the March 23, 2020 lows to March 17, 2021 peak are jaw-dropping. All major retracement levels line-up with a significant level of support or a major gap in the index. The 23.5% level of retracement lines up perfectly with 3,560, the 38.2% level lines-up with a gap at 3,290, the 50% level with 3,090, the 61.8% level at 2,870, and the 78.6% level with 2,570. On a linear chart...
...And a log chart.
If you are a believer in Fibonacci and the Elliot-wave cycle, it makes the S&P 500 current set-up a powerful candidate for a pullback to the 23.5% or 38.2% level of retracement, and dare I say a 62.8% pullback. A drop to 3,570 would amount to a 9% drop from current levels, a drop to 3,290 would amount to a decline of an additional 15.7%, and a drop to 2,870 would be a drop of 26%.
It is probably not by chance; a similar pattern exists in the QQQ ETF, with the ETF already falling to and testing the 23.6% retracement level around $297.
Couple that with a VIX that is at the low end of the range, and Intraday may have filled the gap created from February of 2020. This helps to make this current setup in the market an interesting point in history.
Overall the trend in Amazon is still lower as determined by the relative strength index and could result in the stock declining to around 2,660 in the weeks ahead.
Deere's log chart reveals how nicely the channel has been in the stock and how that channel is now in jeopardy, with the potential for a retracement to the lower end of the channel at $335.
Roku continues to move further into content, now with the acquisition of "This Old House." It proves that you need to be more than just Switzerland, and maybe their ad-only model isn't the end all be all. The stock is now at an inflection point. A break in the uptrend probably sends this thing spiraling back to $225.
AMD has held support at $74 on several occasions, and as I have said for months, this Xilinix deal is the worst thing that could have happened to current shareholders and is why this stock has down nothing for months. Again, there is a difference between good deals for companies and good deals for the stock. This is a deal that is good for the company, not the stock.
Is this end of the line for Freeport? It could be. The RSI suggests it is. We will find out a lot of it breaks below $31.50.
Those speculators in copper are closing out their long futures positions pretty quickly. Better watch out.
Buckle up, this week might get rocky.
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.
Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.