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#Macro – $SPX, #Rates
- RTM: Here We Go Again!
- RTM Unusual Options Activity: Zillow May Be Heading Higher
- RTM: MCM 3Q’23 Quarterly Letter
- RTM: Stagflation Appears To Be Here
- RTM: 24 HRS
- RTM: Trends For Higher Rates And Strong Dollar Continue
Stocks finished the day flatish, no surprise, given the rally last week and the trends we have seen over the last 18 months. As of today, the S&P 500 call wall is still at 4,400, and that means this index will remain capped until such time the call wall rolls higher or we begin to see the index trade lower again.
I continue to think that last week was nothing more than a gamma squeeze, which will end in the same manner other gamma squeezes have ended, which is a return to the origin at 4,100. Besides, when I used to be called a Permabull, I would always be reminded how markets don’t bottom on Friday, which is what October 27 was.
These rallies have become unable at best throughout 2022, and they tended to end similarly. If correct, the call wall at 4,400 should act as a ceiling on stocks advancing, and eventually, we should trade lower again, just as we have seen since the mid-summer and most of last year.
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Rates were higher today, with the 10-year up and holding to support at the 50-day moving average, but more importantly, at a short-term support level of around 4.5%. We need to see the 10-year get above 4.8% to get a better sense of where the 10-year may be heading from here. The Treasury actions that start tomorrow will give us a big clue into this.
If rates go down, then it could help to push the call wall on the S&P 500 up, push the index up, and possibly return it to 4,500. But at this point, there is no evidence to support that, and at this point, given my view on the economy and inflation, I tend to think that rates aren’t going to be coming down but instead still going higher. But again, this week will fill in a lot of information. So, I am trying to be open-minded.
So essentially, the S&P 500 continues to trade with rates and the dollar, and to that point, nothing has changed.
Today, we also saw the CDX High Yield index move up some. This is part of the equation that seems very important to where stocks go, not over the short term but over the longer term. If credit spreads continue to widen, then it will be tough for stocks to rally whether we are in a seasonally bullish time of the year or no matter how many breath thrust indicators, Vanna and charm flows we have, or colors of the rainbow. Becuase the S&P 500 has been trading with credit spreads for months, a measure of financial conditions. If rates continue higher and and spreads widen, it will not be a happy fourth quarter.
Unfortunately, I was hoping that on October 27, when we got to 4,115 on the S&P 500, as I had talked about repeatedly since the summer, I would get some to talk and think about where the S&P 500 might go in 2024. But that opportunity was never given, so I find myself in the same position I was in 3 weeks ago, trying to figure out what happens next on the endless merry-go-round.
My biggest problem is that I like to deal in a world of facts, mechanics, fundamentals, and technical. Right now, that is where they take me.
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.