Subscribe to The Free Market Chronicle and join the 2,679 subscribers getting it for FREE!
8/11/24
#Stocks:
#Macro: #RATES, $USDJPY, $AUDJPY, $MXNJPY, $SPX
Check out My Reading The Market’s Macro Sub4scription Service For More Content Daily:
The S&P 500 finished flat (that means it didn’t really go up or down) because Nvidia went up by 5%. It was a weak day, with 342 stocks going down and only 159 going up. Also, the CDX HY Spread index (a measure of risk in high-yield bonds) was higher, and so were the 1-month implied correlation index (which shows how stocks move together) and the VIX (which is like the market’s fear meter). The stock market got a bit of a break in the last two trading sessions (days) because Japan was closed on Monday. But that changes tonight when Japan releases its PPI report (which tells us about inflation there). Tomorrow morning, we’ll get the US PPI report, then Japan’s GDP (how much their economy is growing) on Tuesday evening, US CPI (another inflation measure) on Wednesday morning, and US retail sales and continuing claims (people still looking for jobs) on Thursday. So, there’s going to be a lot of important news in the next few days.
The big question is, what will this news tell us? Will it suggest that Japan’s central bank (BOJ) needs to keep raising rates or that the US central bank (Fed) needs to cut rates? Or maybe it will suggest that the BOJ should cut rates and the Fed should keep them the same. It’s like a game of roulette (a spinning game where you don’t know where the ball will land). Round and round the data goes, and where it stops, no one knows.
My guess is that by Friday, the USDJPY (how many Japanese Yen you get for one US Dollar) will either be much higher or much lower, and the stock market will probably follow that move. The important level seems to be 147.85 on the USDJPY. If it goes above that, it might go back to 149 or even higher. But if it doesn’t, we might go back to the lows we saw on Monday. It looks like a triple-top pattern (a chart pattern that traders watch), but we won’t know for sure until it either goes above 147.85 or drops below 146.25.
If the AUDJPY is sending a signal, then it’s signaling that the USDJPY might break lower in the coming days, based on a rising wedge pattern (a chart pattern that often predicts a price drop).
It looks similar to the MXNJPY as well (which also shows a similar pattern that could suggest a price drop).
It also looks like the 10-year rate has formed a head and shoulders pattern (a bearish sign), with the neckline at 3.89%.
In the meantime, we have what looks like an upward-sloping handle forming on the S&P 500 futures chart.⬤
Along with that, there’s still a giant gap down at 5,200 that needs to be filled from last week’s jobless claims “miss.” This was certainly one of the more perplexing 2% rallies I’ve seen in recent times.
If the data suggests a USDJPY drop, it’s bad for stocks. If the data points to a USDJPY rise, it’s good for stocks. It’s that simple right now.
-Mike
Charts used with the permission of Bloomberg Finance L.P. 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. 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.