Here’s Why Stocks May See A Steep Decline on February 20

S&P 500 (SPY)

Stocks continued to rise on Tuesday with the S&P 500 increasing 15 basis points to close around 2,780. We are now about 15 points from our zone of resistance at 2,795. I’m getting the sense that the rally may pause tomorrow, February 20 with a steep pullback to around 2,750 over the next day or two. There appears to be short-term rising wedge forming in the S&P 500, and then there is a pretty sizeable gap at that level. It would at the very least suggest a drop to 2,760.

s&p 500, spx

No, I don’t think it changes anything longer-term. No, I don’t think a one or two-day sell-off is the end of a rebound in global growth or stocks. It will be a one or two sell-off, nothing more and nothing less. I’m sure all the headline will be something bearish like: “The Next Big Wave Lower Is Upon Us”, with this big scary bear and drool coming out of its mouth.  I don’t believe that to the case.  Like this one. 

oops, wrong one. He actually looks rather friendly. Hungry. But friendly.  😛

Of course, I could be wrong, and the S&P 500 can continue to rally. I see a pullback in stock prices at the moment.

NASDAQ

We can see a similar pattern has formed in the NASDAQ as well.

Nasdaq, ixic

Boeing (BA)

Boeing is one example of a stock that has a similar pattern forming in the chart. Maybe we will get some “trade news” tomorrow that reads something like: U.S. and China still light years apart.

boeing, ba

Industrials (XLI)

The same pattern is present in the industrial ETF the XLI.

xli, industrial

Consumers (XLY)

Here it is again in the consumer discretionary ETF XLY.

consumer stocks

Be prepared, that’s all. Don’t be shocked. Again, maybe I’m wrong, but a lot of charts are all pointing to the same thing, hard to ignore. Still, at this point, I’m not concerned.

Yields

Here is one more thing, look at the 10-year. Does this look like a chart that is about to rise sharply? Not to me.  How do Christmas Eve lows sound? Certainly speaks to falling stock prices.

10-year

Copper

Did you see the monster break out in copper today? Yes, it rose all the way to $2.86. That is a big move for copper, watch for $2.91.

copper

Roku

That may be all Roku wrote. The stock reached about $55.50 and backed off. Close enough to our $56 target if you ask me. Gap is filled. Next stop is probably $48.

roku

Freeport (FCX)

Freeport had its big break out today, and as long as copper keeps rising, Freeport stands a chance to increase to $13.90.

fcx, freeport

GE

GE is at the point where if it will continue to rise, it needs to do it soon. Otherwise my idea of it rising to $12.20, will be finished.  The RSI suggests that it does continue to increase.

ge

AMD

AMD looks like it is getting ready to rise and break out, after consolidating the last few days. A break out could take the stock on towards; I would think, $29.

amd

This article first appeared on Mott Capital.

Mott Capital Management, LLC is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Past performance is not indicative of future results.