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This week’s YouTube Video:
This week will be full of economic data, but the big data will come on March 1 and 3, when the ISM manufacturing and services indexes are released respectively. The ISM Manufacturing survey is expected to rise to 48 from 47.4 last month. Meanwhile, the ISM manufacturing prices paid index is expected to rise to 46.5 from 44.5 in January. The job report is not due this week and is delayed until March 10.
This will put extra focus on the ISM reports as they will provide February’s first inflation and employment reading. But overall, I think these two reports are unlikely to do much to reverse the current trend of rising rates and a stronger dollar. However, hotter numbers could result in trends in rates and the dollar growing stronger.
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The dollar has broken a downtrend and probably has room to run between 105.75 and 106 before running into any meaningful resistance.
Meanwhile, the 2-year has also broken out; I think it’s heading above 5%. The weekly chart shows no major resistance level until the 2-year hits 5.1%, a rate last seen in 2007.
The LQD corporate bond ETF has fallen sharply and is at support currently. A break of support at $105.50 would signal that the LQD has further to fall, with gaps at $104 and $100.80 potentially the next stops.
Bonds 20 Yrs. + (TLT)
The TLT has a similar look to the LQD, but the TLT has further to fall before testing support at 99.50. But with a gap at $94.50, a further decline in the TLT seems likely.
S&P 500 (SPY)
The S&P 500 broke below the October uptrend by gapping below it, completing the bump and run reversal pattern. The index isn’t oversold yet based on the RSI and could have much further to drop, given how much rates have risen thus far. For now, the next major support level comes at a long-term downtrend of around 3,900 and then around 3,780.
The IBB biotech ETF has broken down after failing to move meaningfully above resistance at $135. Biotech is a good proxy for where the market thinks rates are going because these companies tend to be long-duration growth assets, and higher rates affect them the most. Therefore, watching the IBB can provide insight into where equity investors think rates are heading. Currently, it appears that the IBB is likely heading lower to around $121, which means rates may be heading higher.
Internet ETF (FDN)
The FDN First Trust DJ Internet ETF is back below $136, which had been strong resistance for much of the fourth quarter of 2022. It appears that the January rally may have been a false breakout attempt. Unless the FDN can quickly re-establish that breakout, the ETF is likely to head lower toward $118.
Adobe finished below all the lows between the end of November and the beginning of January, around $325. This suggests a potential bearish change in the trend for the stock. Furthermore, there is a significant gap to fill at $300.
Have a good week
Charts used with the permission of Bloomberg Finance LP. 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. Past performance of an index is not an indication or guarantee of future results. It is not possible to invest directly in an index. Exposure to an asset class represented by an index may be available through investable instruments based on that index. 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.