Stocks Drop On September 7 As Yields Surge Higher And Algo's Take Over

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September 27, 2021

Stocks – DOCU, GE, F,

Macro – SPY, YIELDS

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Stocks finished the day lower, with the S&P 500 dropping by roughly 30 bps and the Qs dropping by 80 bps. Small caps rallied, with the Russell jumping by around 1.5%. 10-year yields were up to approximately 1.5% today, which sent the algo’s into overdrive buying the typical reflation names. The problem is that yields are no longer rising because of inflation or more substantial growth expectations. They are rising due to the FOMC meeting and expectations that the Fed will begin the tapering process.

Economic growth has moderated quite a bit, and current estimates call for third-quarter growth of 3.2%, based on the Atlanta Fed model. At this point, given that consensus analysts’ expectations had been for 7% growth when the quarter started, we have to wonder if the slower growth rate has correctly been priced into the market. If not, then this whole dynamic of buying financials, materials, industrials, etc., may not prove to be the correct one.

Yields

We will see if yield can get through the 1.51% region; I am hesitant to say they will. Rates around the globe are very low, and growth rates are moderating. Unless we see an uptick in rates globally, I would be surprised to see the 10-year advance much further. I do happen to think the short end of the curve will rise, which will flatten the curve out.

S&P 500 (SPY)

The S&P 500 is now flirting with support at 4,430. I noted earlier today in the member’s area that I believed we had just completed a corrective wave, and the next leg should start once the index falls below 4,430. If that turns out to be correct, then I would take the lows of 4,300. (Premium content – get the first 2-weeks free when sign-up — RTM – Value May Now Outperform Growth)

General Electric (GE)

GE continued to rocket higher. I noted last week there was some bullish options betting, and the chart looks positive. If it can clear that trend line around $105, I think it will have room to run higher to roughly $115. (Premium content – get the first 2-weeks free when sign-up — RTM Exclusive- GE Maybe Poised For A Big Rebound)

Ford (F)

Ford is frustrating me; I have no idea why this stock should rally given their production cuts. Yeah, EV’s are great; who cares. EV will cannibalize their ICE cars, and they will be in the spot they were. Currently, the stock is retesting the uptrend today, and we need to see what happens tomorrow. If this is just a retest of the breakdown in August, then the stock should start falling; if not, I throw my hands up in frustration.

DocuSign (DOCU)

It looks like DocuSign broke support today at $270. We will need to see a follow-through tomorrow to confirm this breakdown. If the break is really, the stock is probably heading back to $200, and the gap.

Take care

Mike

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