The stock futures are trading higher this morning…and it sure looks like the S&P 500 index wants to make it to the 4,000 level over the near-term. However, we question whether it will close above that level today. We have the yield on the 10-year note very close to its highs for this move…and we get the all-important employment number tomorrow. If that number is a strong one…and it sends rates higher, it would not be good for the stock market (especially for the tech-laden Nasdaq). Since that the markets will be closed tomorrow…investors will not be able to react to this key number for three days…it would make sense to us that some investors will want to take some chips off the table today…so that they don’t get burned early next week (when they can finally react to the employment data).
If the S&P was not at its all-time high, we’d be less concerned about what impact the employment rate might have on the stock market over the short-term. However, when you combine the fact that this key data-point coming on a day when the markets are closed…with France announcing a new monthlong lockdown (which makes the rest of Europe vulnerable for the same kind of move)…it’s probably not the best time to be getting aggressive on the buyside of things in the stock market.
Don’t get us wrong, the employment data might end-up being quite benign tomorrow…and thus we’ll have nothing to worry about. It’s not like the last few employment reports have been gang-busters, so maybe it won’t have much of an impact at all. We’re merely saying that investors won’t miss a whole lot if wait until next week before they get even more aggressive on the buyside of things…in order to make sure that long-term rates are not going to see another leg higher…and create more problems for the all-important tech group.
Shifting gears…..we’ve talked quite a bit about the charts of several different stocks and ETFs recently…saying that it will be important that they’re March lows are not broken. If they ARE broken, it will be negative for those stocks/ETFs…and since they are important assets, it should be negative for the broad market as well. So far, none of these assets have seen an important “lower-low”…so if they can bounce further away from their key support levels, it’s going to be quite bullish.
However, we’d like to add two more charts to this list. The first one is the ARKK ETF. It bounced-off of its early March lows this week, so the $110 level on this highly publicized ETF is now an even more important support level. If it can continue to rally as we move through April, it will be positive for the ETF (and for the volatile assets that are held in this ETF). If, however, it breaks below that level in any meaningful fashion this spring, it’s going to be a BIG red warning flag for these volatile assets…and for the broad market in general.
If ARKK does indeed break-down, it does NOT mean that the long-term bullish prospects for this ETF are not good. I would merely indicate that it had lost a lot (repeat, A LOT) of short/intermediate-term upside momentum…and thus it will likely fall quite a bit further before it bounces-back in a compelling way. (First chart below.)
The second chart is the one for AMZN. We have heard some positive opinions from around Wall Street over past week or two about AMZN and several other FAANGs as well. There is no question that AMZN is a GREAT company, but its stock continues to be dead money…as it has not gone ANYWHERE for 8 months (while the S&P 500 has rallied ANOTHER 25%!!!). In fact, it is trading very near the low-end of its 8-month sideways range. In other words, even though AMZN is a great company, its stock is NOT a great stock right now. Therefore, we are watching the 2950 level on AMZN…which is its lows from September and early in March. Any meaningful break below at level will give it a key “lower-low” AND take it below the lower-line of a “descending triangle” pattern. So that kind of development would definitely be very bearish for AMZN on a technical basis.
As we have said many, many, many times over the years, sometimes the stock of great companies can go down in a significant way. AMZN’s has done exactly that a couple of dozen times…while the company has been changing the world…over the past 25 years. If it breaks below 2950 in any meaningful fashion, the odds that it will see yet another significant decline will climb considerably. (Second chart below.)
Finally, I’d like to make a quick personal comment this morning. I found out that Mary Jane Bush passed away yesterday. Mary Jane ran the equity trading desk for John Hancock…and then for Independent Investors (when Hancock spun them off into a separate unit) for several decades. Mary Jane was trading stocks when almost no women were doing that in the 1970s, so she was a true pioneer. Even though she was in the vast minority, she received TOTAL respect from EVERYBODY in the “old boy network” of the Boston trading community in the 1970s, 1980s and 1990s. (Many of those “old boys” started their own careers in the 1960s, but they ALL had complete respect for Mary Jane…and treated her accordingly.)
For those of us who were just starting in the 80’s and 90’s, she was unbelievable. She gave everybody a chance. She didn’t care who you were or where you came from. She was very nice, but could be very tough when she needed to be….and her integrity was beyond reproach. There are dozens of people in the trading community (both men & women) who owe her A LOT for helping them in their careers.
I remember when she retired…and she went down to NYC to ring the closing bell on the NYSE. That was an incredibly appropriate gesture by the NSYE. No, she wasn’t famous…but Mary Jane belongs in the pantheon of women who have paved the way for tens of thousands of women who work on Wall Street (and in the business world in general) today. She made a real difference in the lives of everybody she touched.
Matthew J. Maley
Chief Market Strategist
Miller Tabak + Co., LLC
Founder, The Maley Report
275 Grove St. Suite 2-400
Newton, MA 02466
Although the information contained in this report (not including disclosures contained herein) has been obtained from sources we believe to be reliable, the accuracy and completeness of such information and the opinions expressed herein cannot be guaranteed. This report is for informational purposes only and under no circumstances is it to be construed as an offer to sell, or a solicitation to buy, any security. Any recommendation contained in this report may not be appropriate for all investors. Trading options is not suitable for all investors and may involve risk of loss. Additional information is available upon request or by contacting us at Miller Tabak + Co., LLC, 200 Park Ave. Suite 1700, New York, NY 10166.