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6/22/22
STOCKS – TSM, FCX, XOM
MACRO – SPY, IEF, LQD, COPPER
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The S&P 500 finished the day lower by 13 bps. It was a volatile day, with the market dropping sharply to open and rallying sharply, only to close flat. There was a strong sell-off at the open, with the S&P 500 falling to around 3,720 and rebounding nearly 80 points to 3,800. But in the end, it closed at approximately 3,760.
Maybe it was due to Powell’s testimony; I’m not sure. He had nothing new to say, which may have been reason enough to rally.
I don’t think anything changed today, so I will stick with my view that the S&P 500 retraces to under 3,700 in the next couple of sessions.
Financial Conditions (IEF / LQD)
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As measured by the IEF/LQD ratio, financial conditions tightened again today and made a new closing high for the cycle. So typically, when this ratio rises, it tends to coincide with the S&P 500 dropping. So either the ratio is playing catch up to the S&P 500, or the S&P 500 has a new low coming very soon. Tomorrow will tell us a lot.
I inverted the IEF/LQD ratio on the chart below to make the relationship with the S&P 500 easier to see.
Exxon (XOM)
Today, I wrote up a story about Exxon and a potential move lower in the stock. A bearish megaphone has formed, which could see the stock fall first to around $83, but I think there is potential for $70.
Freeport (FCX)
Copper prices have been dropping, and today Freeport also fell by nearly 8%. It is a big spot for Freeport on the chart, with the stock hovering around technical support at $30. Where copper goes, Freeport will follow. But if Freeport drops below $30, there is a long way for this to fall, potentially to as low as $26.
Copper
Copper is now trading below $4 and appears to be heading to around $3.70, which is the next big support level.
Taiwan Semi (TSM)
As noted over the weekend, copper seems to be following Taiwan Semi lower. So it probably isn’t a good sign that Taiwan Semi is back to trading at its recent lows. This is, of course, also bad news for Freeport.
Have a good one!
-Mike
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. 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.