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It will be a big week, with the CPI report on Thursday and a bunch of government bond auctions later this week. That means rates will be on the move, and word that the China zero covid policy will remain in place, and the dollar too.
Stocks got a bid on Friday following a slightly hotter-than-expected jobs report. The stock rally came on dollar weakness as the Chinese yuan rallied. That rally seems to have now been pre-mature, meaning the dollar will likely return to its strengthening ways.
The yuan was trading around 7.32 when it closed on Thursday, and rumors that China would lift its covid policy strengthened the yuan versus the dollar, sending it to 7.17. But now that the government has said that the policy will not be removed, the dollar is likely to strengthen, and then the yuan is likely to move back to around 7.32.
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Dollar vs. S&P 500
The dollar index and the S&P 500 futures have been trading inversely to one another for some time, and should the dollar begin to strengthen again, the market gains from Friday should melt, and the S&P 500 should continue on a path lower.
On top of that, this week, we will be getting a 3-year, 10-years, and 30-year auction, along with a CPI report on Thursday, which could come in hotter than expected. The bond market will also be closed on Friday for Veterans day, but stocks will be left open. The 10-year appears to have broken out of another bull flag, and a simple projection suggests the 10-year can rise to around 4.72%. Given the path of the 2-year, which is probably on its way to about 5%, a 10-year around 4.7% doesn’t seem all that improbable.
TIP ETF (TIP)
A rising 10-year rate should also help drag real yields higher, ultimately resulting in the TIP ETF moving lower. The TIP ETF moves inverse to yield, and when real yields rise, it indicates that the TIP ETF should move lower. The TIP ETF consolidation has occurred since the end of September. That consolidation is the only reason we have stock prices hanging in. Once the TIP ETF starts making lower lows again, it will drag stock prices lower. Once again, the TIP is very close to breaking down; the only question is if it will happen this week.
The QQQ is already flirting with its lows and isn’t that far off from making a new one. A move lower in the TIP ETF would push the QQQ to new lows.
ARKK ETF (ARKK)
What is also back to its lows is the ARKK ETF, and like the QQQ, it is very close to breaking toward a new low as well. There is a clear downtrend, and the RSI negative sloping suggests downward momentum.
Tesla is again back in the $205 zone, and the RSI is trending lower. Furthermore, we have been watching support at Tesla hold repeatedly, but at some point is bound to break, and with momentum this bearish, it could happen this time around. A break of support sends the shares lower to about $180.
I think it was last week that I noted that DocuSign was close to breaking out of a bear flag and that it did on November 2. Support is close to around $38.
Intel is showing signs of life after a horrible decline. The RSI has finally turned higher, and the stock has reversed its downward trend. It still has much to prove and needs to clear resistance at $29.50. But it looks better than it has looked over the past few years.
Have a good week
Charts used with the permission of Bloomberg Finance LP. This report contains independent commentary to be used for informational and educational purposes only. Michael Kramer is a member and investment adviser representative with Mott Capital Management. Mr. Kramer is not affiliated with this company and does not serve on the board of any related company that issued this stock. All opinions and analyses presented by Michael Kramer in this analysis or market report are solely Michael Kramer’s views. Readers should not treat any opinion, viewpoint, or prediction expressed by Michael Kramer as a specific solicitation or recommendation to buy or sell a particular security or follow a particular strategy. Michael Kramer’s analyses are based upon information and independent research that he considers reliable, but neither Michael Kramer nor Mott Capital Management guarantees its completeness or accuracy, and it should not be relied upon as such. Michael Kramer is not under any obligation to update or correct any information presented in his analyses. Mr. Kramer’s statements, guidance, and opinions are subject to change without notice. Past performance is not indicative of future results. Past performance of an index is not an indication or guarantee of future results. It is not possible to invest directly in an index. Exposure to an asset class represented by an index may be available through investable instruments based on that index. Neither Michael Kramer nor Mott Capital Management guarantees any specific outcome or profit. You should be aware of the real risk of loss in following any strategy or investment commentary presented in this analysis. Strategies or investments discussed may fluctuate in price or value. Investments or strategies mentioned in this analysis may not be suitable for you. This material does not consider your particular investment objectives, financial situation, or needs and is not intended as a recommendation appropriate for you. You must make an independent decision regarding investments or strategies in this analysis. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Before acting on information in this analysis, you should consider whether it is suitable for your circumstances and strongly consider seeking advice from your own financial or investment adviser to determine the suitability of any investment.