May 13, 2021

STOCKS – AMD, BABA, JD

MACRO – SPY, TIP

Mike’s Reading The Markets (RTM) Premium Content – FREE 2-WEEK TRIAL

• RTM Morning – Stocks Set To Bounce, Will It Hold?
• RTM Morning – Stocks Sink As Inflation Soars
• RTM Morning: More Pain Comes On 5.11.21
• RTM Video – Capitulation?
• RTM MORNING – Reflation Trade May Be Running Out Of Room
• Measuring The Life Cycle Of The Reflation Trade
• MORNING NOTE- TOO MUCH OF A GOOD THING
• Is The Reflation Trade Ready To Deflation?
• RTM MORNING: WE ARE THIS CLOSE TO THE CLIFFS END

Stocks finished the day higher, despite the hotter than expected producer price index. So stocks plunged yesterday on hotter CPI, rebound today on hotter PPI, make any sense? Well, no. Really, this seemed to be a bit of bounce more than anything; perhaps it will carry through to tomorrow, perhaps not.

The VIX fell sharply today, and that likely means that there were plenty of people closing out their put positions, and that gave the S&P 500 the energy it needed to climb. There really is no other explanation for today’s action.

S&P 500 (SPY)

It looks almost like there is a pennant pattern that has formed on the hourly chart. That is usually a continuation pattern, and it would seem to suggest lower prices for tomorrow. For now, the March 2020 uptrend acted as strong resistance on two occasions today. We could view this as a re-test of the breakdown for the moment. Tomorrow will likely determine a lot. We do get retail sales, and I think if retail sales disappoint, the immediate thought might mean the Fed can’t tapper. But really, it strengthens the case of slowing/stagnate growth with rising prices. I can’t image how a stagflation type of scenario is good for stocks, but if the bulls are creative, they could figure something out, I’m sure.

TIPS (TIP)

Quietly this afternoon, the New York Fed noted it would be shifting how it would be buying bonds ever so slightly. Most notably, they were going to be increasing the purchases on the longer end of the curve and reducing TIPS.  We will see if it gets the TIP market moving higher. The TIP ETF did move lower around the time of the release.

Alibaba (BABA)

Alibaba didn’t have a good day after reporting results. The stock looks like it is getting oversold here, at least in the short term. It should find some support around $198.

JD.com (JD)

JD.com looks really weak, too, and I don’t think it has bottomed yet, but getting closer. I think $60 is likely the next stop.

AMD (AMD)

AMD still has another leg lower to take; I still say it is going to $62.

-Mike