Mott Capital Management
Michael Kramer is the founder of Mott Capital Management. His unique investment philosophy centers on seeking investment opportunities that are influenced by everyday life activities, and by observing new trends and products that are popular or are trending towards popularity. Additionally, he devotes a significant part of his research to global macroeconomics and central bank policies impacting financial markets. Michael has over 20 years of industry experience began his career in high-risk trading environments, trading both US and international equities. His trading skills coupled with his comprehensive, financial analysis of public companies, have given him a unique perspective on investing, which stands out from analysts who simply look at top-line numbers. In addition to fundamental analysis, Michael also incorporates technical and options market analysis into his research.
Stocks Drop But A Rally May Be Coming After Options Expiration
Yesterday was another miserable day for stocks, with the S&P 500 dropping 3.25% and hitting the 3,650 level we discussed earlier in the week. Unless we are about to go on some unforeseen path, I think that level should hold some, and we should get a nice countertrend rally. I don’t think a bottom is in yet, but we are getting there.
That 3,650 level falls right on the main trend line that has defined the shape of the sell-off from the very beginning. Unless we are going into some crash mode and heading to 3,350. I think next week we could see a nice rebound back to around 3,725
Today is quadruple witching, which means we could see a countertrend rally start today or Monday, which can send the S&P 500 and the QQQ higher again—perhaps sending the Qs back to $280.
For the S&P 500, there is a nice big gap that needs to fill up to 3,800, but I would look for the first level of resistance to come around 3,725. Options expiration should free up the markets to trade higher, as market makers have to unwind their hedges and buy back S&P 500 and NASDAQ futures, helping lift stocks.
Advanced Micro Devices (NASDAQ:AMD) fell below support yesterday at around $86, which may be important. It has held on several attempts. But this last attempt proved to be too much.
I mention AMD because NVIDIA (NASDAQ:NVDA) finds itself on crucial support. It hasn’t broken yet, but if AMD broke support, I imagine that NVDA will too.
Keep an eye on the Biotech XBI ETF. The market is making new lows, and this ETF isn’t. The XBI led the market lower, and if it stops going down, it could be telling us where we are in the cycle of this pullback.