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Stocks finished flat on the day despite the dollar and rates falling sharply following weaker-than-expected ADP and ISM services reports. Notably, the ISM report revealed a surging prices paid index, which climbed to 68.7, the highest reading since November 2022.
Still, that wasn’t enough to offset the weaker-than-expected headline ISM services reading, which came in at 49.9 versus estimates of 52, and the ADP report, which showed just 37,000 jobs created in May against estimates of 110,000. This likely places additional importance on tomorrow’s continuing claims data and, more significantly, the jobs report on Friday. Continuing claims have been steadily rising, and this trend is likely to come into sharper focus tomorrow as well.
This ended up sending the 10-year rate lower by nearly 11 bps on the day, closing at 4.35%, and pushed the dollar index down by 41 bps. Should this trend continue, it will likely bring the US/JGB interest rate differential back into focus, as the spread between the US 10-year and the 10-year JGB fell by 14 bps to 2.84%, placing it back near a critical support level.
A break of support in the interest rate spread would likely result in a decline in USDJPY, potentially pushing it below 140.
There used to be a correlation between the USDJPY and NASDAQ 100 futures, but that relationship appears to have weakened recently, and the reason for this is unclear. It might be that we won’t fully understand the reason until the USDJPY drops below the critical 140 level. For now, 140 has been a solid barrier for the USDJPY.
The odds of my reversal pattern in the S&P 500 playing out continue to fade. The only thing keeping it alive was the late-day move lower, following the formation of a head-and-shoulders pattern after 11 AM. A close below 5920 tomorrow would give the pattern another chance to survive for at least one more day.
Meanwhile, the 2B top pattern on the S&P 500 futures continues to survive, but only by the narrowest of margins. Today’s price action nearly reinforced last week’s topping pattern, given the intraday move higher followed by a lower close.
-Mike
Terms By ChatGPT
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ADP Report: A monthly measure of non-farm private employment, published by ADP (Automatic Data Processing), offering a preview of the official jobs report.
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ISM Services: A monthly report from the Institute for Supply Management that surveys non-manufacturing businesses, tracking overall economic health.
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Prices Paid Index: A sub-component of the ISM report, measuring changes in prices businesses pay for materials and services.
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bps (basis points): A financial unit measuring 0.01%, commonly used in describing changes in interest rates or yields.
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Dollar Index (DXY): An index measuring the value of the U.S. dollar against a basket of major foreign currencies.
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Interest Rate Differential: The difference in yields between similar maturity bonds from two different countries.
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JGB (Japanese Government Bond): Debt securities issued by the government of Japan.
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USDJPY: Currency pair representing how many Japanese yen (JPY) one U.S. dollar (USD) can buy.
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NASDAQ 100 Futures: Financial contracts allowing traders to speculate on the future value of the NASDAQ 100 Index.
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Head and Shoulders Pattern: A chart formation used in technical analysis signaling potential reversal, consisting of three peaks with the middle one highest.
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2B Top: A technical trading pattern indicating a potential reversal from bullish to bearish after a failed attempt at a new high.
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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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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