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#STOCKS – $XBI, $NVDA, $BAC
MACRO – $SPY, #RATES
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The biggest story in the market goes back to rates, even though the bond market was closed here in the US. The bond market was open everywhere else in the world, and UK rates were on the move again, with the 2-Year gilt rising a jaw-dropping 28 bps to 4.34%, while the 30-year gilt rose by 25 bps to 4.68%. These are massive moves, and considering the BOE is bidding for these bonds is stunning. Because it seems like the BOE’s attempts to stabilize the market isn’t working.
Today the BOE announced it would increase its daily purchases of long-dated gilts up to $10 billion a day from $5 billion. As of this morning, the bank noted that there had been eight days of operations offering to buy up to GBP 40 billion in bonds but had only bought about GBP 5 billion. Despite the increased size, the BOE only bought GBP 853 million today. It seems like the BOE’s plans aren’t going very well. So you have to wonder how much of this move is now the short taking over and pressing, or how much is a loss of confidence in the BOE’s ability to control things.
It looks now like the UK 2-Year has broken out of a bull flag, which could mean significantly higher rates.
It probably doesn’t mean good things for when the US 2-yr reopens from its day off, and considering the chart looks nearly the same as the UK 2-year with that same bull flag, I would be mindful of watching this tomorrow. As I have said for some time, I think the US 2 Year is heading to approximately 4.6%.
TIP ETF (TIP)
The ETF market was already pricing in a move higher in rates. The TIP ETF fell about 60 bps today and is close to breaking even lower. There appears to be a descending triangle, which suggests that once support at $104.75 breaks, the selling will ramp up again.
S&P 500 (SPY)
The S&P 500 fell by 75 bps, and if rates are going even higher, then I think the S&P 500 still has to go lower. The diamond pattern from last week is very bearish and, coupled with the island reversal, suggest we will see a new low, and I still think we are likely to see 3,500 and probably lower, but I’m not getting into this right now.
Well, it took a while, but Nvidia was finally close enough to my target of around $115 today. A decline below $100 is not out of the question, so I will have to watch this support region to see what develops.
Bank of America (BAC)
Bank of America appears to have a Head And Shoulders pattern in place, and despite its decline, I don’t think it has fallen enough yet, with the potential for the shares to drop back to $28ish.
The XBI fell out of a bear flag and potentially has room to drop around $68 based on the length of the pole and projection out of the lower portion of the flag.
That’s all for today. We will see what tomorrow will bring.
Charts used with the permission of Bloomberg Finance LP. 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 investments.