Stocks – AMD, GOOGL, FB
Macro – SPY, QQQ, DOLLAR, RATES
MICHAEL KRAMER AND THE CLIENTS OF MOTT CAPITAL OWN GOOGL
It was a wild turnaround Tuesday, with the S&P 500 opening sharply higher to finish the day up just 18 bps. The index managed to trade up to 4,598 and then turned lower, briefly turning negative in the morning session. The equal-weight S&P 500 ETF (RSP) was actually down 20 bps.
S&P 500 (SPY)
I will give this one more attempt before I go back to technical analysis school, as noted at some point late last night on Twitter. There is a rising wedge pattern on the S&P 500 futures and cash markets. Additionally, we seemed to have found resistance at the 1.618% extension from the October 13 low. Now today’s high would be an ideal place for a “B wave” top. We will have our answer tomorrow, one way or another. If this turns out to be a peak, then I am looking for a move back into the mid-4400 to start.
NASDAQ (QQQ)
Meanwhile, the Qs got to within pennies of its all-time and couldn’t hold it, finishing higher by 31 bps.
Yield Curve
The yield curve continues to flatten, and it is now dangerously close to a big break lower on the 30-2’s. Now the economic data is picking up dramatically starting tomorrow, and any one of those data points could spark a move lower in this curve. It would come at the hands of the short-end rising and long-end staying unchanged or falling.
Dollar
With an ECB meeting on Thursday, if the ECB pushes back against raising rates anytime soon, it could easily lead to rates in Europe moving lower, dragging US rates down with them. This should also be dollar bullish. The dollar index rose by 15 bps today, and it was around 10:30 when the dollar started to move up, and the risk-on rally reversed.
The VIX managed to finish the day higher, with the S&P 500 higher. It seems this 15 level is the floor for now.
AMD (AMD)
AMD reported better than expected results on the top and bottom lines. Gross margins showed no growth sequentially at 48% and in line with expectations. The company sees revenue at $4.5 billion for the fourth quarter, which is better than the estimated $4.3 billion and below the street high of $4.6 billion. Additionally, the gross margin guidance of 49.5% was slightly below estimates for 49.6%. Given the big run-up in the stock, I don’t see how these results were good enough. They are good, but the shares have risen nearly 21% since the beginning of October. I would look for support around $117.
Alphabet (GOOGL)
Alphabet reported strong results too, but the company missed estimates for its cloud unit. So that is sending the stock down about 2%. There is a gap to fill $2,740, so that should offer some support.
Facebook (FB)
Facebook fell about 4% today and finally broke support at $323, closing around $316. I think at this point; it seems likely that the stock will test support around $300.
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Originally Posted on October 26, 2021 – Stocks Rise On October 27 As Turnaround Tuesday Finally Shows Up
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