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8 Signs The Worse May Be Over For Stocks and Yields Are Going Lower
MICHAEL KRAMER AND THE CLIENTS OF MOTT CAPITAL OWN TSLA, NFLX
Green Shoots Emerge
That was the quickest 5% drop in the NASDAQ I have seen in a while. The machines were working overtime today. On October 1 (Monday of THIS week) the NASDAQ topped out at 8,107. Today it hit a low of 7,715 a drop of 4.9%! Wow. Talk about movement. (See more in our member area: 4 Signs That The Worst May Be Over For Stocks)
It just occurred to me I have not even once looked at the VIX over the past three days! But now I am and it is a stunning 15.3, and it got as high 17.6! Anybody home? What does that say about the future of volatility? Maybe that the market does not expect it to last, the NASDAQ just fell by 5%, and it got has 18? Really? Perhaps it is broken? 😛
By comparison in January and Feb’s sell-off the VIX reached 50!
The S&P 500 also found support at both the 50-day Moving Average and around 2,870.
The technology ETF also found a bounce at support around $72.75.
But what may be most important is that US 10-Year Treasury yields hit the magical 3.25% and failed on its first attempt. That is a positive a sign.
I’m going to double down here and say that yields are going lower, not higher. I’m serious you think I’m crazy I know. But wage data today was inline at 2.8%, which is pretty much in line with where it has been all year except for last month.
As for the big run in yields, the dollar must-have soared right? Wrong. The dollar is in the same place it has been since, well, when the 10-year was at 2.8%. Yeah. The 10-year has increased by 45 basis points since the end of August, and the dollar has done NOTHING!
I know it is because rates here aren’t rising as fast as they are in let’s say Europe. Well, that sure isn’t true either because the spread between US 10 year bonds and 10 Year bunds is wider now than in August by nearly 20 bps.
To me, this is the currency markets way of saying to the bond market may be you are worrying over nothing. If yields in the US were about to rise rapidly, I would think the dollar would react more strongly, and it has been rather tame. These bank stocks have traded horribly as well, the BKX is down 75bps today, despite the yield curve steepening. My read through; don’t expect yields to continue to rise from here and I expect that stocks get back on the track higher.
Amazon retested last weeks lows around $1,870 and found a meaningful bounce, and that is undoubtedly a positive all around.
Netflix also had a very nice bounce at support.
Tesla is playing a game of fill the gap; I think that has become pretty obvious. Good, get the sell-off over with.
I wish I had something encouraging to say about Facebook, but I don’t.
AMD continues to drift lower; I still see $25.70 coming.
Oh look Roku got to $64.25 and bounced. Do you know anyone that called that?
There will plenty more over the weekend! Enjoy.
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.
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