6/13/22

STOCKS – AMD, NVDA

MACRO – SPY, 2-YR, FED FUNDS RATES

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Stocks fell sharply again as the bond market re-prices interest rates for the Fed. The market is not happy with the Fed’s current pace of hiking rates and is taking matters into its own hands. The 2-yr yield rose by 27 bps today, climbing to 3.34%. It reached as high as 3.41% at one point. Since Thursday, the 2-yr rate has been up more than 50 bps or two rate hikes in Fed terms.

The 2-yr rate went through resistance at 3.25% in a blink. With the Fed funds futures pricing in overnight rates rising to 4% by the middle of next year, a 2-yr climbing to 4.25% doesn’t seem all that impossible. I don’t remember if I mentioned that idea yesterday or not?!

2-Yr Rates

Anyway, the last time the 2-yr rate was this high was back in 2007, and there isn’t much in the way of technical resistance between the 2-yrs current rate and the 4.25% region.

S&P 500 (SPY)

At this point, I think there is a good chance that we will see 3,650 on the S&P 500 before not too long, maybe even tomorrow. There is only some small support, around 3,725, and after that, 3,650. Even if yields settle down tomorrow, I think with the big move in rates, the PE multiple of the index needs to compress more, putting further downward pressure on stocks. Additionally, 3,650 takes us back to the downtrend that started back in January.

Nvidia (NVDA)

Nvidia closed right on support at $156; with all those gaps to fill, it seems like it will not take much in a technical sense to get the stock moving lower towards $136. Who knows, it could drop to around $117 over the next few weeks.

AMD (AMD)

AMD looks bad; the stock has failed multiple times at its long-term downtrend. Additionally, the little uptrend it had formed was shattered today. The only thing holding this up right now is support at $85.50, which has been tested 2-times already. I doubt it will hold again. With $73.50, acting as the next spot for a potential support region.

Anyway, there are a lot of stocks like these two just sitting and testing support levels. My gut says that if these two break support, all the others will too, which means we will see another wave of selling.

-Mike

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