Subscribe to receive this FREE daily commentary directly in your email
3/28/22
STOCKS – XOM, NVDA
MACRO – SPY, OIL, AUDJPY
Mike’s Reading The Markets (RTM) Premium Content – $45/MONTH OR $400/YEAR – The First 2-weeks are FREE to try.
PRICES WILL BE RISING TO $65/MONTH OR $520 ON MARCH 31; START YOUR FREE TRIAL NOW TO LOCK IN THE LOWER RATES. CURRENT MEMBERS ARE UNAFFECTED!!!
- RTM: Volatility Measures Rise As Stocks Stall [Daily Udpate]
- RTM Exclusive: Betting On Surging Volatility (Short-Term Options Idea)
- RTM: The Most Important Close In Some Time
- RTM: Oh Nvidia [Daily Update]
- RTM Exclusive: Betting Exxon Drops [Short-Term Options Idea]
- RTM: Stocks Finally Drop [Daily Update]
On Monday, March 28, stocks rose, with the S&P 500 surging nearly 30 bps in the last 7 minutes of trading. Sort of bizarre, manic behavior, which becomes outsized in illiquid markets with wide spreads and thin books.
The frustrating thing about this market is that there have been mechanical reasons for its rise over the past two weeks, from the unwinding of bearish options bets to quarter-end rebalancing. So there is no way of knowing just how strong this market is or how trustworthy it is. My hunch is not trustworthy at all. This gain is entirely unwarranted and has no merit from a pure fundamental aspect. Nominal and real rates are materially higher over the past week, plus financial conditions are much tighter, the dollar is stronger, oil is higher, and the fed is certainly not your friend.
The only bullish aspect for stocks is that the Yen is collapsing versus every major currency right now, which tends to be a risk-on signal. But the declines in the Yen have more to do with rising oil prices and the widening gap in monetary policy between Japan and other nations.
AUDJPY
This trade is most notable between the Aussie Dollar and the Japanese Yen cross. But even this signal does not have a perfect correlation with equity values. However, one does exist.
This currency pair needs to be an item to watch because oil prices fell sharply today, by nearly 8% to trade back to $104. We can see a strong relationship when overlaying the oil price with the AUDJPY cross. If oil prices continue to drop, which is impossible to predict given this environment, then the risk signal is likely to follow.
Oil is also crucial because inflation expectations are likely to start falling if prices keep dropping, which means real yield should push higher and hammer those NASDAQ stocks again. At least until the past two weeks, real yields and the NASDAQ had a nearly perfect inverse relationship. But then, in the middle of March, that flip-flopped around the time AUDJPY began to rip higher. This chart shows the NASDAQ 100 (upside down) versus the 5-year TIP Rate.
Exxon (XOM)
Exxon finished the day down today due to the falling oil prices. I think the odds have increased for that pullback to the $76.50 I mentioned last week.
Nvidia (NVDA)
Nvidia managed to rally today but could not get past resistance at $282. It seems like the gamma squeeze is over.
Anyway, that is all…
Mike
Mott Capital Management, LLC is a registered investment adviser in the State of New York. 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. Please remember that past performance may not be 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.
Volatile Week Ahead With Fed And September OPEX
Mott Capital's Market Chronicles 8 hours ago