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Rates and the Dollar Rocket Higher on July 6, 2022

This column is my opinion and expresses my views. Those views can change at a moments notice when the market changes. I am not right all the time and I do not expect to be. I disclose all my positions clearly listed on the page, and I do not trade my account on the stocks spoken of in this column unless fully disclosed. If that does not work for you stop reading and close the page. Do not bother me or harass me.

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7/6/22

STOCKS – LRCX, SNAP, FCX

MACRO – SPY, QQQ, TIP, DXY, 2-YR

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Stocks finished the day higher, with the S&P 500 climbing 36 bps. The index did nothing all day. The sellers couldn’t get anything going early in the day, and the buyers failed to rally the market into the close.

Surprisingly, the dollar has rallied materially over the last few days, and equities have brushed it aside. Since the beginning of the year, the S&P 500 has moved opposite the dollar index. At least for the past couple of days, that relationship has broken down.

The chart below shows the dollar index inverted (upside down). It indicates that when the dollar strengthens, it negatively impacts equity prices. The dollar has recently made a new high (low in the chart), suggesting lower stock prices.

TIP / QQQ

Also, today, we saw our old friend, the TIP ETF, start to move lower again. Despite the move down, the QQQ ETF rallied. We have seen these divergences often, and they typically resolve with the QQQ “catching” down to the TIP ETF. I think the same will happen again this time.

2- Yr Treasury

I had thought rates broke out last week, but it turned out to be a head fake for the moment. Rates appear to be setting up to break out again this week. The 2-year rate climbed almost 15 bps today, following those very hawkish Fed minutes. The 2-year needs to clear 3% to get moving to the upside.

In today’s free story, I talked about why I think it is unlikely that the Fed will back off at the first sign of slowing growth.

Freeport (FCX)

Freeport got as low as $26.20 today and pretty much to where I thought it might go. I think this looks oversold at this point.

SNAP (SNAP)

SNAP is trying to form an inverse Head And Shoulders pattern with a bullish divergence on the RSI. That colossal gap still needs to be filled at $22.50. It seems like this is one that is worth keeping an eye on at this point.

Lam (LRCX)

The gap in Lam Research is filled at around $375. The problem for Lam is that there are gaps much lower on this one too. Semis have been a leading indicator for the market for some time, so what happens here with Lam may be an indication about what happens with the rest of the stock market does.

Have a good one

Mike

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. 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.