Subscribe to receive this FREE daily commentary directly in your email
12/14/21
STOCKS – GS
MACRO – SPY
- RTM: It Broke
- The Market Is Waiting For Something To Break
- RTM- The Bond Market Is Dreaming Of A Recession
- RTM- The Market Might Actual Think The Fed Won’t Taper Faster
- RTM: Stocks Stall Below Resistance
- RTM: The Bond Market Warnings Grow Stronger
- RTM Exclusive: Uber’s Stock May Be Ready To Surge
Stocks fell sharply to start the day, with S&P 500 trading lower by 1.3%. Around 2 PM, the buyers came in and managed to cut the loss in half, with the S&P 500 ending the day down by around 75 bps.
It was a telling day, with a big gap lower following the hotter than expected PPI print. Using the old measure from around 1915, the Producer Price Index showed that wholesale prices rose by almost 23% in November. This measure was retired about a decade ago from the headline, but I still like to use it. Nearly every time the PPI reached a level of 10% or higher, it has been accompanied by a recession within 2-years. The exception being 1934 and maybe 1951.
It appears the recession has come as the Fed jacked the Federal funds rate higher.
Looking through this lens explains why bond yields are doing what they are doing, which is moving lower on the back-end of the curve. Essentially, the bond market is telling us that the Fed and higher prices will do what they always do, cause a recession, or at the very least, a significant economic slowdown.
Since 1965 returns in the S&P 500, when the PPI has reached more than 15%, have not been good. In November 1974, PPI hit 23.4%, the S&P 500 had already started falling, going into that PPI peak and was down nearly 50% from January 1973 until it bottomed in October of 1974. The PPI hit almost 17% in February 1980, and the S&P 500 fell about 27% from November 1980 until August 1982. The PPI hit 17% in July 2008 and lost nearly 57% from October 2007 until March 2009.
It doesn’t mean that history has to repeat itself this time, but I’m not too fond of the odds of the Fed making a soft-landing here, and the bond market doesn’t appear to either. This is why the 10-year minus the 2-year spread is breaking down and looks like it is ready to fall off a cliff on its way to just 50 bps.
S&P 500 (SPY)
In the meantime, the S&P 500 did finally break support today at 4,665. The index fell sharply to 4610, where it found support but failed to fill the gap. I think there is a good chance we have completed waves 3 and 4 today and that tomorrow we resume lower, maybe towards that 4,590 area.
Goldman (GS)
Goldman may finally be ready to drop below $375 and head towards $352. It has a sort of double top bearish reversal pattern forming. We won’t know for sure about the double-top pattern until it breaks $352.
That’s all for today.
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. 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.
The Stock Market Drifts As Rates And Dollar Eye Breakouts
Mott Capital's Market Chronicles 4 hours ago