This column is my opinion and expresses my views. Those views can change at a moments notice when the market changes. I am not right all the time and I do not expect to be. I disclose all my positions clearly listed on the page, and I do not trade my account on the stocks spoken of in this column unless fully disclosed. If that does not work for you stop reading and close the page. Do not bother me or harass me.
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STOCKS – XOM, NVDA
MACRO – SPY, OIL, AUDJPY
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.
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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 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 managed to rally today but could not get past resistance at $282. It seems like the gamma squeeze is over.
Anyway, that is all…
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.