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The Stock Market May Be Setting Up To Break Sharply Lower

The Stock Market May Be Setting Up To Break Sharply Lower

Posted November 9, 2022 at 5:19 am
Michael Kramer
Mott Capital Management

STOCKS – TSLA, DIS

MACRO – SPY, VVIX

Stocks finished the day higher by around 56 bps to close at 3828. The index had been up sharply, more than 1%, but managed to give it all back Intraday, even turning negative at one point. It appears that the futures have formed a diamond reversal pattern. These aren’t the most straightforward patterns to find, but this one is very close to breaking, so we should find out if it is correct relatively soon. If this does work out, I think we see 3,640, followed by new lows.

S&P 500

Volatility (VVIX)

The VVIX, which measures the volatility of the VIX, appears it may have bottomed, and today it started to push higher. We will want to see if this continues, as it can be a good leading indicator for the direction of the VIX and the overall S&P 500. If the VVIX starts to rise, the VIX is likely not far behind.

Volatility

Disney (DIS)

Disney’s shares dropped sharply after posting disappointing quarterly results. The stock is trading at around $94. After that, you are talking about a stock that is probably heading back to the low to mid-80s. At the of end the day, this stock has gone nowhere since late 2014.

Disney

Tesla (TSLA)

Tesla continues lower, dropping further today. It is in between support at $180 and resistance at $209. The $180 area does become important because after that there is a long way down with a gap to fill to around $136. Not only that, but $180 could serve as the neckline of a Head And Shoulders pattern, and breaking that neckline would open the door to a new set of problems.

Tesla

Anyway, I sense that tomorrow and the rest of the week will get much more interesting.

Originally Posted on 8th November – The Stock Market May Be Setting Up To Break Sharply Lower

Disclosure: Mott Capital Management

Mott Capital Management is the portfolio manager for one portfolio offered by Interactive Advisors. Interactive Advisors clients do not invest directly with the Portfolio Managers like Mott Capital Management, and the Managers do not have discretionary trading authority over Interactive Advisors client accounts. The Portfolio Managers on the Interactive Advisors platform simply license their trade data to Interactive Advisors, which then allows its clients to have the same strategy and trading decisions mirrored in their accounts if the Portfolio is in line with their risk score. Portfolio Managers like Mott Capital Management implement their trading philosophy and strategy without knowing the identity of Interactive Advisors’ clients or taking into account these clients’ individualized circumstances.

Mott Capital Management has entered into a Portfolio Manager License Agreement with Interactive Advisors pursuant to which it provides trading data IA uses to offer a portfolio to its investment advisory clients.  Mott Capital Management is not affiliated with any entities in the Interactive Brokers Group.  

Interactive Advisors is an affiliate of Interactive Brokers LLC.

Pursuant to the Investment Management Agreement between Interactive Advisors and its clients, all brokerage transactions occur through Interactive Brokers LLC, an affiliate of Interactive Advisors. The use of an affiliate for brokerage services represents a potential conflict of interest as Interactive Brokers LLC is paid a commission on trades executed on behalf of Interactive Advisors. Interactive Brokers LLC does not consider this conflict material as it does not sell, solicit, recommend, trade against or otherwise attempt to induce Interactive Advisors to place any orders in any products. Interactive Advisors does not offer services through any other broker-dealer.  All trading by Interactive Advisors is self-directed. Interactive Advisors clients acknowledge this potential conflict of interest and authorize Interactive Advisors to execute transactions through Interactive Brokers LLC when they open an Interactive Advisors account. Clients should consider the commissions and other expenses, execution, clearance, and settlement capabilities of Interactive Brokers LLC as a factor in their decision to invest in an Interactive Advisors Portfolio. Interactive Advisors believes it satisfies its best execution obligation by trading its clients’ trades through Interactive Brokers LLC. While there can be no assurance that it will in fact achieve best execution, Interactive Advisors does periodically monitor the execution quality of transactions to ensure that clients receive the best overall trade execution pursuant to regulatory requirements.

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