Is it possible my recent decision to resurrect Microsoft as our #1 global bellwether caught a very important top?
We could know soon. I had put the stock on the back burner because it spent most of 2024 carving out an unremarkable head-and-shoulders pattern. Now it would appear that MSFT's lackluster performance may have been warning of a quiet but massive distribution by portfolio managers. I started to doubt this last week when the stock's manic upthrust over several days threatened to turn the H&S pattern into a bullish consolidation. Another $2-$3 higher and that is what would have happened. Instead, with today's hellish dive, the bearish perfection of the year-long pattern and its incipient threat of disaster were restored in mere hours.
The plunge was nastier than we might have expected, especially considering the software giant's revenue stream from recurring subscriptions is practically bomb-proof. And yet, the stock fell 3.76%, trailing only Amazon and Tesla in the megastock loser’s column. The latter’s share price is so bloated with Musk-worship in a fatally saturated EV market that TSLA seems destined to become the best short in the lunatic sector (aka 'Magnificent Seven') as the bear market runs its course.
I’d warned in the current ‘Morning Line’ (see above) that Mr Market might throw the kill switch at the height of Santa season, the better to crush the multitudes who evidently fear an ugly surprise, if one materializes, early in the new year. If Wednesday’s selling picks up tempo into week’s end, we’ll have our answer: a Christmas bloodbath for investors. How very clever it would be for Mr Market to disguise the onset of an epic bear market as a merely corrective reaction to today’s mildly hawkish pronouncement from the Fed.
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Rick Ackerman