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8/20/24
#MACRO: $NDX, $SPX, $USDJPY, $US10Y
#STOCKS: $NVDA
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The 10-year rate ended the day in a particularly interesting position, given its significance in the broader financial landscape. It closed at 3.81%, just above the August 5 close of 3.79%. The 3.8% level has been a key point since the start of the year. When it first reached this level in late December, it quickly bounced back. This is a crucial level for the 10-year rate because if support at 3.8% breaks, it could potentially lead to a drop in the rate down to around 3.30%.
Tomorrow, we’ll see the job revisions through the end of the first quarter, and there’s some concern that the number could reveal as many as 1 million jobs less were created over the past year. While it’s uncertain, the movement in the 10-year yield suggests the market is anxious about this data. This puts us on a yield curve steepening watch as the 10-2 spread continues to consolidate around the -15 basis points region. More importantly, it is likely that 10/2 is heading over the next few months, based on current trends.
The weakness in the dollar index also suggests that the market is nervous about the upcoming data and the data expected at the start of September.​
Typically, falling rates, a steepening yield curve, and a weaker dollar point to rising recession risks. Right now, the market is signaling these concerns. This is why we’re observing a weakening state in both the bond and FX markets. If the bond and FX markets were optimistic about the economy, the 10-year yield wouldn’t be falling, and the dollar wouldn’t weaken.
This dynamic also strengthens the yen against the dollar, with the USDJPY falling back to 145.25 over the past few days. Interestingly, the stronger yen hasn’t yet impacted the equity market, likely because the Nikkei 225 and Japanese markets have remained stable.
I suspect that if the markets in Japan start getting rocky again, the US markets will begin to feel the effects. This afternoon, Nikkei futures are trading down about 1.4%. Generally speaking, a strong yen isn’t favorable for Japanese stocks. So, if the yen continues to strengthen, it’s likely that the Nikkei and other markets will follow it lower.​
When you compare the Nikkei and the NASDAQ 100 in JPY terms, their charts are nearly identical. They have followed almost the same market twists and turns since 2021 and even further back than that.​
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The key point is that the USDJPY closely tracks the 10-year Treasury rate. If the 10-year rate is at a critical support level and breaks lower, the USDJPY is likely to follow suit, which means the USDJPY could be heading lower as well.
By the way, Nvidia stopped at $130 because that is where the gamma was heaviest for the week.
(BLOOMBERG)
Anyway, something to consider ahead of tomorrow’s jobs revisions, the FOMC minutes, and Jackson Hole on Friday.
-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.
Subscribe to receive this FREE daily commentary directly in your email
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.
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