The Bear Is Quietly Stalking Its Prey

Stocks fell on December 11, dropping by around 1%, but managed to stage a typical fabulous Friday comeback. But today’s price action wasn’t shocking and seemed to follow the typical Algo style of trading. However, what mattered most is the trend, and those, for the most part, are several damaged in the short-term.

Today was merely a game of filling the gap.

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But, it’s never easy to say how these things will go. However, it would seem to me that lower prices lie ahead. The RSI created a bearish divergence when it failed to make a new high, as the index made a new high.

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The number of stocks in the S&P 500 above the 50-day moving average is diverging from the daily prices.

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I will have a few more things to review over the weekend regarding this. But at least it seems to me we are getting a few short-term sell signals.

VIX

Additionally, there were some big bets that the VIX rises sharply to more than $50 by March. I reviewed it in the subscriber section this morning.

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Ford (F)

The other day in a story, I noted that Ford saw some massive option bet it is trading over $11 by the end of 2021. Ford is struggling here, but it has found some support around $9. It could go lower still, from the looks of it, maybe $8.50. You can read in more detail about the options trade in this story here.

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DocuSign (DOCU)

DocuSign’s results clearly weren’t good enough to keep the stock moving higher. It amazes me how this stock is valued. Even with blow-out results, it is not growing fast enough to support the stock. Crazy. The momentum on the RSI looks horrible; I’m surprised the stock isn’t down more. Read more here.

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Wells Fargo (WFC)

Despite my bearish market outlook, Wells Fargo may be getting ready to rise. As strange as that sounds. There was a sizeable bullish options bet in the stock, and the pattern on the chart looks like a bull flag. Perhaps it breaks out towards $33.25. Again, you can read more here.

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Disclosure: Mott Capital Management, LLC is a registered investment adviser. Information ...

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William K. 1 month ago Member's comment

An interesting and educational article, indeed. Thanks for the addition to my education. Certainly it appears that the pricing of shares is based on a lot more than facts about performance. It seems that an equal amount of steering is done by emotions of greed and fear. And certainly I am not the first one to say that.