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#Stocks – $AMZN
#Macro – $SPX, #rates
- RTM: Live Zoom Session 10.27.23 At Noon ET
- RTM: Entering A Congestion Zone
- Stocks Are On The Cusp Of A Significant Breakdown
- RTM Options Alert: Intel’s Decline May Have Only Just Begun
- RTM: Stocks And Bonds Diverge Ahead Of Treasury Auctions And Earnings
- Stocks Rally As Rate Drop
- The Magnificent 7 May Be In Trouble
MICHAEL KRAMER AND THE CLIENTS OF MOTT CAPITAL OWN AMZN
Stocks finished the day lower and were saved by a drop in rates following a solid 7-year auction. This pushed Treasury rates lower in the second half of today’s trading session. It allowed stocks to rally off their lows and the S&P 500 to finish the day down by about 1.2%.
Tomorrow will be the PCE report and University of Michigan inflation expectation data. More rate moving data.
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But something more important may have developed, suggesting the period of stocks outperforming bonds may be over. The ratio of the SPY to TLT has been trending higher in a nearly perfect straight line since March 13, and that broke today. Unfortunately, it doesn’t tell us how stocks underperform bonds; it just tells us, if this should follow through, that stock prices aren’t going to do as well as bond prices.
The same scenario is seen in the SPY to IEF ratio, with the ratio falling below the neckline of a triple-top pattern.
The pattern is also present in the QQQ to TIP ratio.
The QQQ to TIP ratio pattern should look familiar because it resembles the Bloomberg Magifience 7 index. This may tell us a lot about how things unravel from here, primarily by stock prices falling faster than bonds.
The break in these ratios is not positive and would suggest that stocks are way ahead of bond prices and yields. For example, if the SPY were to return to the historical ratio of 4.05 times the TLT from October 2022 to May 2023, the SPY would be worth $343.
Something similar happened a few weeks back when pricing the S&P 500 in Canadian dollars has led to a lower index.
Anyway, Amazon reported tonight, a stock I own, and the results were okay. AWS missed the revenue and missed on growth rates. The 4Q sales guidance of $160 to $167 billion, or $163.5 billion at the mid-pointed, missed estimates of $166.57 billion.
Like Meta’s last results, the stock popped about 5% after hours and then gave all of the gains back shortly after. Like Meta, implied volatility for Amazon was too high and skewed to the calls, with a ton of call gamma up $125 and higher.
Again, this was talked about in today’s midday video for subs. (See: RTM: Entering A Congestion Zone)
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. 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.