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May 31 – Stock mentions: GM, F, INTC, AAPL, XBI
Michael Kramer and the clients of Mott Capital own AAPL
- S&P 500 Futures -31 points
- US 10-Year Treasury -2.16%
- VIX 19.32
- Oil $55.46
- Dollar Index 98.06
- Shanghai -0.24%
- Hong Kong HSI -0.79%
- South Korea KOSPI +0.14%
- Japan Nikkei -1.63%
- Germany DAX -1.94%
- UK FTSE -0.90%
Rates – May 31
Hey, look at that the German 10-Year is now trading at its lowest level ever -20bps.
But more interesting is that spread between the US and German Bonds have now fallen below key support at 2.4%, and that means the spread will fall further to around 2.25%. That means US 10-Year Bonds could fall another 10-15 bps. That would take it to 2-2.05%.
But perhaps more important is that the 2-Year needs to hold at 2%, or the 2-Year is falling a long way, to like 1.8% or perhaps even further to 1.45%.
Sometimes long term downtrends are just too difficult to overcome.
Another Day Another Worry
Stocks are falling on May 31 on the news overnight about the pending tariffs with Mexico. If anything things are never boring, and continually testing your resolve as too much how much you are willing to withstand. I’m not even really sure what to call this thing with Mexico? How can we have a trade war when both countries are in the process of ratifying a free trade deal? A border war?
The good news is that Mexico and the USA are in the same hemisphere and even the same continent. So hopefully, talks can move at a pace faster than those with China. Mexico is reportedly sending its foreign minister to DC today. Hopefully, they will have a sweet and beautiful lunch, and somewhere between the main course and the chocolate cake things can be smoothed out.
In my opinion, this is very much a political move. Remember Chuck Schumer mocking Trump in the White House in December over border funding saying I thought Mexico was going to pay for the wall. Trump does not want this as something the Democratic will hang over this head come re-election time. Now, he can say, you know what Chuck I got Mexico to do something about it. If Mexico chooses not to help, then he can he did can I say got them to pay for it. Of course, many of the people the tariffs would hurt are the people in the swings states of Ohio and Michigan where all the Auto companies live. So I really can’t imagine that this will go on for long.
Leaving political view aside, the one thing Trump doesn’t want to remembered as or have said is that Obama was more business-friendly than Trump. So while Trump is willing to take a hit in the short-term to appear tough, longer-term, I can’t believe he is ready to hurt business or the economy. If the economy goes south, there is no doubt that he will not win re-election.
Full disclosure, I voted for Trump, and until to this point, I have supported his economic policy. However, for the first time yesterday I thought to myself that maybe Biden wouldn’t be so bad.
Anyway, enough with that.
S&P 500 (SPY)
You can see in the E-mini S&P 500 futures is dropping on May 31; the index is falling below the lows on May 29. Should the S&P 500 open below 2,768, it will be a bad sign. That level will now act as resistance. So let’s hope support at 2,768 holds at the open.
Obviously, tariffs for Mexico will be terrible news for the likes of GM and Ford. While GM will claim it hurts American jobs and makes it more expensive for consumers, they have no leg to stand on. Trump will fire back, open that plant in Ohio you just closed, bring your jobs back to the US.
GM fell below support at $34.60 and now is at risk of falling even further to $32.16.
Ford is also hovering at support at $9.30 and could be on its way to around $9.
I will be watching the Semi stocks closely, to see how the group responds to the broader market weakness. It will tell us if they are bottoming out or not.
Intel is the one to watch and that stock has held firmly around $43.
AAPL will also need to be watched closely on May 31. I’m waiting for support at $175.
Finally, Biotech is the last one to watch. The XBI continues to hold support at $80. We do not want to see that break.
Hey its Friday, think about the number of tweets that may fly between Friday night and Monday morning. You wanna be long stocks going into the weekend?
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 results. AAPL