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November 22, 2021
Stocks – AMZN,
Macro – SPY, XLE, XLI, XLB, DXY
- RTM: Rates May Now Rise Faster, Sooner
- Tactical Update: It Is Now A Matter Of When The Market Corrects, Not If The Market Correct
- RTM- Risk-Off On OPEX
- RTM Exclusive: Its To Time Buckle-Up
- RTM Exclusive: PayPal May Rebound Sharply Short-Term
- RTM- The Dollar Is Ripping
- RTM Exclusive: Disney May Be Poised For A Big Rebound
- RTM- The Dollar Continues To Soar As Rates Move High
This is a video of today’s midday update for members of RTM.
Stocks started the day higher, but it didn’t end well. The market initially jumped on the news that Jay Powell would get a second term as the Fed Chair. It was so widely applauded that quite literally everything went up. You know, like stocks, the fed funds futures, the dollar, the 2-year yield. The problem is that the stock market is not the sharpest tool in the shed, and while the entire market, except for stocks, realized Powell’s renomination was hawkish, stocks had no clue what was happening.
You see, the Fed Fund futures are now pricing in the first-rate hike by May. But how can that be? The Fed said it wasn’t going finish tapering until the middle of the summer, and Powell made it clear that taper and increasing rates weren’t one and the same.
Well, the dollar and yield curve had an excellent answer. Quite loudly they both said they now think the taper accelerates, so the taper will end sooner than expected. After all, Richard Clarida, the soon-to-be former Vice-Chair of the FOMC, alluded to that on Friday.
So wait, if the entire market, except for stocks, thinks that the taper will will end sooner and rates are going to rise faster, how is that good for stocks? How is it good for stocks that the dollar is increasing as rates rise. Probably not so good.
How is it good that the energy, materials, and industrials rallied to start the day with the dollar ripping higher and rising above resistance at 96.30, and now probably on its way to 97.70.
After all those 3 sectors don’t perform so well during the initial phases of when the dollar is strengthening, see the inverted dollar chart below and the years 2015/2016 and 2018.
Anyway, the S&P 500 seemed to catch on late in the day about the potential problems it is now facing. You know, like a high valuation, slowing EPS growth, slowing global growth, a strengthening dollar, and tightening financial conditions. So the index dropped 80 bps in the final hour of trading.
Meanwhile, the MACD is rolling over, along with the advance/decline line and the RSI, with the next stop around 4590.
Amazon (AMZN)
Amazon didn’t fare so well today, oh well. It fell nearly 2.8%, maybe that’s a double top forming. Maybe it is not. But companies that miss revenue estimates and then lower forward revenue guidance and note higher costs aren’t supposed to rally to near all-time highs, so a move back to $3,300 could be quick.
I don’t know what else to say, if the only things the bulls have to hang their hat on is seasonality and inflows, then I just ask that the last one out please remember to turn out the lights. The party is over.
-Mike
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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.