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4 Stocks That Are Winning and 3 Stocks That Are Losing, While Draghi Wins Again
MICHAEL KRAMER AND THE CLIENTS OF MOTT CAPITAL OWN SHARES OF NFLX AND TSLA
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There is no doubting that Draghi may be the ultimate trader, with an ECB meeting the day after the Fed, and saying thank you very much. The Fed wants to raise rates two more times in 2018, the ECB wants a cheaper currency in 2018, and it achieved just that. The ECB is using the Fed as a tool to push the Euro lower. All Draghi did, was sound a bit more dovish, as I expected, and bought himself some more time about ending QE, and left it open-ended, by saying it is data dependent. The result…the euro action today. (See The Member Area for Full Coverage: Draghi Is The Smartest One In The Room, And Banks Are In Trouble)
The chart of the Euro is breathtaking. The Euro plunged from roughly 1.1820 to 1.1580 versus the dollar in one session. That is a tremendous move, and that is what it looks like when the entire market is wrong.
The equity market is sending a very clear message as well, the risk is on and the banks are toast.
The spread on the 10-2-year treasuries hit fresh new lows today, at just 35 bps, as the 5-2’s fell to only 24bps. As I said yesterday, this is terrible news for the bank stocks, and they sure were down today, nearly 75 bps. Meanwhile, Technology and Consumer stocks were up by 75 bps and 1 percent. Look at the chart of the consumer stocks, XLY.
Is it getting overdone for the consumer stocks? Probably.
Around the Horn
I had no idea that Netflix would rise this quickly to $390, to some extent it seems a bit crazy. Mind you I own the stock. But I would rather not see a rocket ride like this.
Amazon has been soaring as well; it still has a while before it hits $1840.
Tesla broke out and is nearing a significant resistance level at $362.
Broadcom looks set to rise back to $273.
JP Morgan looks like a retest to $106.50 is coming.
Bank of America is on the cusp of a major break down, at $29.20
and Citigroup appears to be just barely hanging on at $65.90.
Dollar
The dollar index had a significant rise right back to resistance at $94.90, and if the dollar breaks out, we will see a significant increase, I think potentially again to 100 on the index, and that will be bad for commodities and inflation.
Inflation Watch
Copper got smashed today.
and of course, Oil, backed off its highs but is respecting the trend line.
Remember stocks do not trade in a vacuum, the entire market complex dictates stock price direction to some extent.
Of course, I could be entirely wrong, about all of this, right? I mean I could be reading the long-end of the curve all wrong. I mean geez it could be about to rise because surely no European bond buyer would want to own our debt at well over 250 bps higher than their own. The whole flattening of the yield curve may be about to suddenly work itself out, after months of contracting. And once those banks get pass those stress test next week all will be well. Right.
Markets get things wrong from time to time, but when the whole market is sending a clear and strong message you best pay attention.
Draghi most definitely won this round.
Night.
-Mike
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