What could have been a disastrous trading session turned into a win in my book. Stocks gapped higher to start the day, only to sell-off hard midday, and then rally sharply back to finish the day slightly higher. To some, it would seem like just a choppy session. What I see are buyers stepping in and the sellers failing to crack the market. A few weeks ago, this would have likely turned into a bloodbath, but something has changed among investor sentiment.
S&P 500
How many times did we see this occur in December with a gap higher at the open of about 50 basis points, only for the market to give back all the gains by lunchtime and then drift lower for the balance of the day? But this time, the S&P 500 fell nearly 1.5% from peak to trough intraday, only to rebound. What seems particularly impressive about today’s price action is that it follows a steep decline on Tuesday.
Technology (XLK)
More interesting was the pattern in the Technology Select Sector SPDR (NYSE:XLK) which managed to retest yesterdays lows around $63.75
Consumer Stocks (XLY)
We can see the same pattern that took place in the Consumer Discretionary Select Sector SPDR (NYSE:XLY) as well.
Amazon (AMZN)
Amazon.com Inc (NASDAQ:AMZN) has nearly the same pattern as the XLY, which should not be a surprise given its 23.4% weight in the ETF.
Tesla (TSLA)
Tesla Inc (NASDAQ:TSLA) fell sharply today on a downgrade by RBC and some negative reports about last weeks layoffs. I went through my thoughts in more detail in the premium area article Tesla: Why The Big Drop? But here is a summary:
The cynical side of me sees this only as the short sellers taking the opportunity to drive the stock down. Everyone knows that the company has a bond maturing in a couple of weeks with a conversion price at roughly $360, and if the stock can stay below $360 then that means Tesla will need to pay the debt off with cash on the balance sheet. That would cut their cash on hand. Blah Blah Blah. You can fill in the blanks.
The stock continues to rise and fall based on the activity of the short-sellers.
I’m not pleased that the stock fell below support today $300, but if it can manage to rise above $300 tomorrow, then no damage was done. If it stays below $300 then it has a better chance of falling back to $260.
Lam Research (LRCX)
Look at that; semiconductor stocks can go up?! Lam Research (NASDAQ:LRCX) is jumping after reporting better than expected earnings and revenue. Additionally, the company gave pretty good guidance. Why do we care? because Lam makes the equipment that companies use to make the chips, so when they do well, it is because other chip companies are doing well. Let's keep our fingers crossed.
The stock is trading above $150, and it could send the stock higher to $157.50
Intel (INTC)
Tomorrow Intel (NASDAQ:INTC) will report results, so we will get first hand just how the chip stocks are doing. The stock has gone nowhere since November, and it would seem it that stock can not rise above $49. I do think that changes after tomorrow’s results with the stock rising back to $52.50, although, this, not the first time I have felt this could happen. It will take a strong earnings report for the stock to get over $49. But I think it does. This is a free article previewing the results I wrote.
Banks (BKX)
The bank’s stocks have paused over the past few days as we expected to happen. Now the KBW Bank is on the verge of a big break out or significant pullback. The RSI suggests momentum is going the right way, that would suggest a rise above 97.25 may be on the way.
Disclaimer:
Michael Kramer and the Clients of Mott Capital own Tesla (NASDAQ:TSLA)