Subscribe to receive this FREE daily commentary directly in your email
February 16, 2021
STOCKS – AAPL, ZM, BA
MACRO – SPY, VIX, TLT
Mike’s Reading The Markets (RTM) Premium Content – FREE 2-WEEK TRIAL
- T.W.A – Does Volatility Lie Ahead?
- Midday: Big Move Coming One Way Or The Other
- Apple’s Stock Sees A Big Bearish Bet
- Cisco Could See Lower Prices After Results
MICHAEL KRAMER AND THE CLIENTS OF MOTT CAPITAL OWN APPLE
Today’s big story was rising rates, and it isn’t just here in the US; it’s global. The US 10-Year rate rose 10.4 bps to close at 1.32%, while the German 10-year rose by 8 bps to close at -35 bps, which sounds super low, but consider on January 6 the German 10-year traded at -63 bps.
These rising rates are the biggest risk to the equity market, as I have been telling everyone for weeks. Tomorrow may not help with PPI due; estimates are for a 0.4% increase m/m and 0.9% y/y. A hotter reading surely could get things moving. Remember, the ISM manufacturing reported prices paid, reaching levels not seen since 2011. (Premium content from January 6 – Morning Note – Yields Are Rising And Are The Biggest Risk To Equities)
The 10-year closed just below the 2016 lows of 1.34%, with the next major resistance level around 1.6%.
But the problem is that when a market is trading historical high levels on the thesis of low rates, as rates rise, the market becomes more and more expensive on a relative basis.
VIX (VIX)
The VIX also moved back over 20 to finish at 21.5, so much for the falling VIX. Again, the VIX is likely at the bottom of the range between 20 and 22, and unless something changes to the structure of implied volatility across the market, the VIX isn’t likely to break down anytime soon.
It takes us back to the risk that is building in the marketplace. Higher rates mean that if equity prices continue to rise, they will grow more expensive versus the 10-year at an alarming rate. Currently, the earnings yield of the S&P 500 trades at a 3.16% premium to the 10-year rate. It also leaves the index at levels versus the 10-year not seen since 2018. It is equivalent to the S&P 500 trading at a PE of 31.6.
S&P 500 (SPY)
From a technical standpoint, the S&P 500 futures continue to struggle at resistance, which is the trend line.
It was a good thing the banks rose sharply today, with the XLF increasing by nearly 2% and the energy sector XLE rising by nearly 3%. It isn’t likely that these sectors can continue to rise at this pace, and that means at some point, the S&P 500 will feel the pressure of rising rates.
10-Year Tip (TIP)
10-year TIPS also rose sharply today, with the yield rising to -92 bps from -1.02% on Friday. Leaving breakeven inflation rates unchanged.
This is by far the most important spread to continue to watch because the 10-year breakeven inflation rate has been the most highly correlated spread tied to the equity market.
Apple (AAPL)
Apple did not have a good day closing below the uptrend and trading down to $133. Late last week, I noted a giant bearish option bet in Apple and that a break below the trend line was likely to set up a decline to around $127 but more likely $120. (Premium subscriber content – get the first two weeks for FREE – Apple’s Stock Sees A Big Bearish Bet)
Zoom (ZM)
Zoom is close to filling that gap, which means it likely rises to around $470. Once the gap is filled, I would expect the stock to turn lower and continue its trend down.
Boeing (BA)
Boeing is very close to moving above resistance at $218. If that can happen the stock has a meaningful chance to push higher to $240.
Ok, see you tomorrow.
-Mike
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.
Subscribe to receive this FREE daily commentary directly in your email
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.
CTA And Volatility Funds Poised To Drive Market Pullback
Mott Capital's Market Chronicles October 10, 2025 2:00 PM