Subscribe to receive this FREE daily commentary directly in your email
Stocks finished lower on the day, with the S&P 500 dropping by 21 bps and the NASDAQ 100 falling by about 70 bps. Still, the markets were more settled now that the S&P 500 moved back into positive gamma, causing volatility to subside.
The S&P 500 closed just below the 50-day moving average, which has acted as resistance for the past two days.
More importantly, these opening gaps have been filled more recently, so it would not surprise me to see the gap from yesterday’s CPI report filled in the coming days, with a retracement back to 5,840.
Interestingly, on the NASDAQ 100 today, we saw that the index closed below both the 50-day simple moving average and the 10-day exponential moving average after moving above them yesterday, which appears to be the rejection of the breakout attempt.
The 10-year continued to give back the recent rise in yields, falling back to 4.6%. The 10-year rate is undoubtedly no longer overextended, as noted late last week, and it is at the 20-day moving average. Chris Waller, one of the most hawkish Fed governors, has turned dove since September. He was once again dovish today and was encouraged by yesterday’s CPI report and still thinks the Fed can get in a couple of rate cuts this year. This helped to push the long end of the curve lower. I’m not sure why there has been a change in Waller’s tone; maybe it was just his time to turn “face” and give up his role as a “heel.” Sorry for the wrestling reference; it seems to work in this case.
I think that the 10-year program will find support in this region. I still think it will ultimately head to 5% and more.
This seems especially true given what could be just the very start of a significant move higher in inflation swaps, based on what appears to be a pennant pattern that has broken out to the upside on the 2-year kind.
The Bank of Japan is very close to raising rates, and the market is assigning a 90% chance this will happen next week. The Nikkei 225 dollar futures are interestingly positioned at this point, hovering just about 1% above an essential line of support. This chart shows that a break of support of around 37,850 could open the floodgates to much lower levels.
I used the dollar futures to make the overlay with the NASDAQ 100 futures cleaner. To say that the Nikkei and the NASDAQ trade similarly is probably an understatement, and a break in the Nikkei probably would send a bad overall message about the direction of the NASDAQ.
-Mike
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.