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Where Do Rates, AMD, AMAZON, ALIBABA, JD, & ACADIA GO?
MICHAEL KRAMER AND THE CLIENTS OF MOTT CAPITAL OWN SHARES OF ACAD
Stocks gave up most their gains by the end of the day as Treasury yield broke out rising above technical resistance around 3.12%. I’m struggling with this breakout, to be honest, I think this the first time in nearly three years I have called the direction of yields wrong. I get plenty of things wrongs but one thing I have been consistently good at calling is rates, the economy, and the broader stock market trends The ADP jobs number came in better than expected and that is what triggered this rise. I’m sure that many traders/investors are worried that wage growth will be stronger than anticipated and that may cause the Fed to become more aggressive.
Anyway, I’m not going to dwell on this today about why I may have gotten this wrong or if I will continue to be wrong. But we should focus on what it may mean and where rates can now go from here should this trend continue. The 10-year yield may be on its way to 3.25% based on support and resistance levels.
We can see the sharp rising in rates is also cause the yield to curve to steepen. That is good for bank stocks.
Again, this today is just one day, and we need to see what the Jobs data on Friday looks like and particularly the wage data. My whole theory of why the labor participation rate has not been rising despite very low levels of U3 unemployment is because all the workers consider “not in labor force” are actually not retired or on disability but merely gave up looking for work. Now that economy is healthy those workers are coming out of hiding and will begin to be counted again. We shall find out Friday whether this theory is right or wrong.
Moving on to other things.
AMD continues to melt, although it closed well off its lows. But $29.40 is now resistance, and the trend in the stock is still lower despite today’s mini rally. I still see $25.70 in the future.
Amazon also continues to trend lower. $1,935 looks like an area of interest to watch.
Acadia had a nice little pop today, with the stock rising to resistance around $21.50. Notice how the stock failed right at that resistance level. Again, this one has had such a significant move higher I’d be happy if consolidated around these prices for the next few days.
Alibaba is struggling with the stock failing at resistance today. But again signs are beginning to improve for the stock as the RSI continues to change the direction of its trend from lower to higher. Patience is needed for this stock.
JD may also be showing some positive trends as it too shifts its RSI. But I think this one still has a long way to go.
Dollar Index (DXY)
The dollar index is once again breaking out and may be on its way towards 96.60
Anyway, that will be all.
Michael Kramer is the Founder of Mott Capital and the creator of Reading the Markets.
Mott Capital Management, LLC is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Past performance is not indicative of future.
AMZN, ACAD, AMD, JD, BABA, SPY