Turnaround Thursday- S&P 500 Surges
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Big time rally today in the markets, suddenly the machines are working correctly again, maybe they needed a tune-up. Today’s action in the market has been noticeably different than days past. Today, we gapped higher, and kept moving higher, a big positive. I’m not entirely convinced though as of today, the rally is nothing more than a one day bounce. Should the S&P 500 rise through 2,595 I would become far more optimistic.
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Part of the skepticism still lies in the Technology shares of the XLK, which is still way above the channel, and is now just refilling the gap created around $64 on November 9. Again, the XLK has only traded outside of the channel on a few occasions and eyeballing the chart suggests this is the furthest we have risen above. So again, there is reason to still be guarded and cautious.
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Tesla
There are signs that risk is coming back into the market, and that means investors appear to be willing to take more of it.
Tesla shares are one such example, with the stock trading back to nearly $316, after being in the mid-$290 just a few short weeks ago.
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Biotech
As we noted yesterday, biotech has seemed to turn, with the Biotech ETF IBB firmly higher today, trading at $311. More importantly, as we said yesterday, the $303 level continues to act as a robust support level and the groups rise should only continue to gain momentum. One can see there was a surge in volume over the two days of trading when the ETF got around the $303 level. In fact, it would seem from looking at the chart $322 is likely the direction the ETF heads to next.
Celgene shares have now broken out with the stock rising above the $102.50 level, with the stock trading firmly over $103. The breakout is notable and extremely important to the health of the sector.
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Inflation Watch
Inflation is coming and it may catch the market off guard. The ten-year treasury rate continues to trade at levels in the 2.3 percent range. But recently Oil has been creeping up in price, and has broken out of a long-term trading channel which had capped Oil around $53 per barrel. With Oil currently trading around $55, it seems the trend is to continue higher, and approach a level of about $62, based on the charts.
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The chart above is an overlay for the price of Oil and the y/y percentage change in the producer price index for the last ten years. It doesn’t take much to see the incredibly tight correlation between Oil and the PPI y/y. This relationship is likely not to change anytime soon either. One risk in the market right now is whether a rise in Oil and inflation will catch the market completely off-guard.
The Ten-Year treasury also looks as though it is getting ready to break out with yields potentially shooting back to perhaps 3 percent, after a year of sideways consolidation.
Just in case you didn’t have enough to worry about!
Night!
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Michael Kramer and the Clients of Mott Capital owns shares of CELG
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Tags: #S&P 500, #Tesla, #Biotech #inflation #oil #celgene $tsla $tnx $celg $ibb #sp500 $spy