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June 10, 2021
STOCKS – WY, BAC
MACRO – SPY, XLF, TLT
Mike’s Reading The Markets (RTM) Premium Content – FREE 2-WEEK TRIAL
- Adding Splunk To The Portfolio
- RTM Inflation Has Likely Peaked
- RTM: Inflation Expectations Are Sending Negative Growth Signal – MU Big Bear Bets
- RTM – Transports And Housing On Watch
- Tactical Update: Sinking Inflation Expectations May Signal Risk-Off
- RTM: Inflationary Pressures Still Building
- AND SO IT BEGINS. PLUS A BIG BEAR BET IN BANK OF AMERICA
- Next Live Q&A Session June 4 At 1 PM ET
- RTM Morning – Zoom Not Growing Fast Enough
- RTM – Waiting On Big Economic Data
Today’s CPI was hotter than expected. So why did rates fall? I think it is because the market is looking at commodity prices in general and see them rolling over, or more importantly, the rate of change slowing. If the rate of change is slowing, then that is telling us that inflation rates in the future will slow. If that is the case, then it is possible that the recent rise in yields is over and that from here, rates can fall back to around 1.3%. My view has always been that inflation rates would be transitory, and at some point this would come into play driving rates lower. By all accounts given the hotter than expected inflation data since April, yields should have broken higher, but never did head to 2%. Anyway, we never got the extra 25 bps I was looking for, but going from 90 bps to 1.75%, or even 1.5%, was a pretty good call on my part. The trade has simply played out.
The jobless claim data was weaker than expected again today; perhaps that changes in July when the unemployment insurance ends for some states. But until then, the bigger risk for yields is lower.
S&P 500 (SPY)
The stock market finally had an up day this week, with the S&P 500 finishing higher by 47 bps. The rising wedge pattern that started on May 19 continues to still be in play. Again, this normally a bearish pattern. It doesn’t mean it has to be this time, but typically, this should result in falling prices.
Falling yields are not good for the reflation part of the stock market, which is why Banks fell sharply today. That rise in banks is likely finished as well, especially if yields keep falling. But more importantly, we continue to see the transports and housing stocks fall too. This seems to be speaking in combination with yields, that something else is going on, and the only thing that comes to mind is that there is some concern about economic growth.
Banks (XLF)
We can see that the XLF ETF broke lower, completing its rising wedge, and falling by 1.2%. Should the trend continue, which I think it shall, then it seem likely that it could move back $36.60.
Bank of America (BAC)
Bank of America fell sharply by 1.5% today, breaking its rising wedge pattern with its next support around $40.80.
Weyerhauser (WY)
Weyerhauser broke down also, with its next level of support at $33.50.
It was a good day for growth stocks, and perhaps the ending of the reflation trade will push growth names higher again. Very hard to tell at this point of the game. We will see what happens tomorrow. But without the reflation aspect of the stock market in play, the S&P 500 could struggle.
Mike
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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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