The Momentum Trade Driving Stocks Higher May Be About To Snap

Well, it was another exciting day in the world of the stock market. We had a repeat of what happened at the end of day Tuesday, and the reverse of what happened yesterday, with the S&P 500 falling by 1.5% from peak to trough, in the final hour. It was worse for the NASDAQ falling by 2%. The amount of volatility in the equity market seems to be getting a little bit out of hand, and I can only wonder what this is setting us up for, likely something not good is brewing.  

There is a very curious trade that is happening in the market and is not as easy as the market is going up on hopes of a V-shaped recovery. It is much more detailed than that, involving Algo’s, options traders, and dealers driving just one massive momentum trade, and when it breaks, it is likely to result in some significant pain. I’m am by no means saying it will result in a retest of the lows, but it doesn’t mean we can’t peel off 10 to 15% very quickly when the trade finally snaps.

The S&P 500 does have a mini-uptrend, which, if broken, could result in a decline to around 2,950 or 2,900. The upside is limited to approximately 3,115.

S&P 500, spx



Copper is starting to trend lower, and we need to watch this very, very carefully. 




For some reason, copper seems to have something in common with the NASDAQ Qs. So, where copper goes may tell us about the future of the momentum trade.



Apple (AAPL)

Apple still looks weak to me, and today I saw a pretty big option bet suggesting shares move lower. For now, I think $295 is the next stop. 

apple, aapl


Salesforce (CRM)

Salesforce is falling after giving what I thought was disappointing guidance. As long as the stock holds support at $172, all should be well. If it breaks $172, look for $165.

salesforce, crm


Micron (MU)

Well, Micron didn’t break out today, and instead failed at resistance for a third time, not good. So we could have a triple top pattern forming or a head and shoulders pattern. Either way, they are both bearish and indicate that shares fall. We need the stock to fall below $42 to know for sure. 

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Disclosure: Michael Kramer And The Clients Of Mott Capital Own AAPL

Disclosure: None.

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