A wide path, strewn with fallen autumn leaves, divides into two paths that diverge in different directions. Autumn landscape.

Stocks and Bonds Go Their Separate Ways On October 16, 2023

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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#Stocks – $XLY, $XLF, $XBI

#Macro – $SPX, #Rates, $vix #dollar

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Stocks were up today by around 1.1% on the S&P 500, but we have gone nowhere now in a week, so the bulls are making no progress. The question in front of us is which way the index will break, and for the past several weeks, we have been able to rely on bonds to give us that answer.

However, today was strange as stocks broke from bonds and rallied despite lower bond prices. At least since mid-August, there haven’t been many times when bonds and stocks went separate ways, but today was surely one of them.

From what I can tell, we have seen this happen a few times, on September 10, September 14, and September 19. Each time, the S&P 500 was lower in the following days because bond prices kept falling. If bond prices keep falling, I think the S&P 500 will find itself lower, too.

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At least for today, it was all about the VIX crush and the weaker dollar. That is what I think propelled stocks higher and caused the divergence. Once the VIX declines slowed, the S&P 500 rally ran out of gas.

Additionally, the big gamma level for this week’s OPEX is 4,400, which will cap any further upside unless that level moves higher tomorrow or in the days ahead. Based on the options activity for Friday and what I saw, I don’t think we will likely see the 4,400 level change tomorrow.


The five-minute chart today has a very symmetrical manufactured-looking shape, and unless the index gaps over 4,385 tomorrow, which was high for today, then I would think the day’s gains are given back in the days to come this week, if not tomorrow.


The 10-year moved higher today but wasn’t able to get past. 4.73% yet. Rates have been consolidating again since the job report. A bull flag may have formed in the 10-year, but until it gets above 4.73%, the move above the trend line today is uninspiring.

It is a similar look for the 30-year rate, with a push above 4.9% needed to point to higher rates above 5% and lower prices.

Ultimately, I think rates on the back of the curve continue to move higher because the yield curve is deeply inverted, and given that a recession at this point doesn’t seem present, the back of the curve still seems too low, and I think the charts reflect a steeper yield curve.


When looking at several ETFs, it is hard to conclude whether the market is bullish or bearish at this point. The (XLF) broke below support on September 26 and has merely returned to support/resistance.

The biotech ETF (XBI) has also seen a similar move lower and higher.

It is also the same pattern for the Discretionary sector (XLY).

The recent rebounds in these sectors look like retracement, and they do not look like impulses to me, and that means that, ultimately, they should fail and turn lower. The one point about the XLF is that JPM, C, and WFC reported what were supposed to be good results, and even still, the XLF hasn’t been able to move through resistance. Tomorrow, Bank of America will report, and we will see what they have to say and whether or not their results are enough to push the XLF in a decisive direction.

A few people have asked me about oil, and at this point, the charts aren’t telling me anything.


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.

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