Will The Markets Decline Turn Into Something Steeper? Probably Not!

Stocks had a mild and unexpected blip on March 4, with the S&P 500 falling about 40 basis points. It was much worse at one point with the index down about 1.2%, but stocks managed to mount a nice comeback.

S&P 500 (SPY)

The S&P 500 found support today around 2,767, which was right around the February 21 low.  Could this be the start of something steeper? Anything is possible. Do I think it is the start of something steeper, I do not.

The chart below shows that the S&P 500 peaked its head above 2,812 early in the morning, only to quickly reverse and move lower. Most important is that the S&P bounced and closed about  80 bps off its lows. It also managed to reclaim the uptrend that has worked so well February 21.

S&P 500, spx

Russell 2000 (RUT)

We can also see there is a nice uptrend in the Russell, that held today. If that uptrend breaks tomorrow, then we might need to revisit the theory. But for now, one day does not make a trend.

russell 2000

Housing (HGX)

Also, one of my favorite leading indicators the Housing sector, HGX, is suggesting a break out could be coming for the sector.

housing

Amazon (AMZN)

Amazon is one stock that surged today, jumping nearly 1.5%. The move higher came after Evercore put out a $1,965 price target for the stock, on the prospects of, get this –improving margins. It would suggest to me that the idea of Amazon being a slowing growth story may be taking hold among investors.  But the problem I see with this is that Amazon margin expansion will mostly have to come from AWS. As I have already explained, Amazon gets very little of its operating margin from its ex-AWS business.  It is going to be tough for Amazon to squeeze more margins for sure, especially for a company that has never cared about making profits.

But regardless, the stock is now on the cusp of that move to $1770.

amazon, amzn

Salesforce (CRM)

Salesforce is getting clocked in the PM trading session after the company gave weaker than expected results. The company is looking for roughly $0.60 per share in the first quarter below estimates of $0.63. It also guided revenue to $3.675 billion at the mid-point, slightly below forecasts of $3.7 billion. The miss seems pretty trivial to me.

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Disclosure: Michael Kramer and the clients of Mott Capital own Acadia, Netflix

Disclaimer: This article is my opinion and expresses my views. Those views can change at a moment's notice ...

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