The Stock Markets Volatility Suggests The Bulls Are Still In Charge

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 (SPY)

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.

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s&P 500, spx

Technology (XLK)

More interesting was the pattern in the technology ETF (XLK) which managed to retest yesterdays lows around $63.75

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technology

Consumer Stocks (XLY)

We can see the same pattern that took place in the discretionary ETF (XLY) as well.

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discretionary

Amazon (AMZN)

Amazon has nearly the same pattern as the XLY, which should not be a surprise given its 23.4% weight in the ETF.

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amazon, amzn

Tesla (TSLA)

Tesla 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.

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Disclosure: Michael Kramer and the Clients of Mott Capital own Tesl

Disclaimer: This article is my opinion and expresses my views. Those views can change at a moments notice when the market ...

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