Michael Kramer and the clients of Mott Capital own ACAD

FOMC

The FOMC minutes revealed that the Fed has the room to be patient with future rate hikes. Reading the commentary, which by the way is incredibly dull, I got the sense they may even be on hold for some time. Consider that the inflation rate is barely at the Fed’s “target” of 2%.

Against this backdrop, many participants expressed the view that, especially in an environment of muted inflation pressures, the Committee could afford to be patient about further policy firming. 

It suggests to me the Fed may be more focused on inflation then the unemployment rates.

Of course, this now creates the feedback loop:  lower rates, means a weaker dollar, which means higher commodity prices, which mean rising inflation.  And the process will begin all over again. Watch, by the end of the year the conversation will shift from slowing growth to an overheating economy with inflationary pressure. You read it here first.

If that wasn’t enough FED for you tomorrow you have Powell, Evans, Bullard, Clarida, and Barkin speaking. 

One more thing before I forget, tonight you China PPI with estimates for 1.6%. 

Rates

Yields moved lower after the minutes with the 2-year falling to 2.55% from around 2.57%. It resulted in the 10-2 spread widening to about 15 basis points from about 13 bps. But more importantly, it is that the 10-year yield appears to be struggling to get over resistance at 2.74% and could be heading back to 2.61%.

Dollar

The dollar moved sharply lower and is likely heading below 95.  That is a real positive for commodities.

Oil

Oil broke over key resistance at $49 and is likely now going to $54, but the big test won’t’ come until around $61.

Gold

Gold could even be on its way to $1,362.

S&P 500 (SPY, SP500)

Stocks didn’t seem to take the same cue from the Fed minutes as the bond and currency markets, are you surprised? I’m not.

The S&P 500’s increased over resistance at 2,580 as I expected, and that level is now acting as support. The next level remains at 2,630, and that continues to be the big test.

Russell 2000

The Russell was able to rise over 1,433, and that means that 1,453 is the next level of significant resistance.

Housing

Even more bullish is that the housing sector continues to rise with the HGX increasing 2.6% to 266. Like the other indexes, this one is quickly approaching resistance at 269.

Alibaba (BABA)

Alibaba managed to break above $151, and I think that is a huge positive for the stock. Couple it with the bullish signals we were seeing out of Hong Kong last night could send this stock is on its way to $166.

JD

JD broke out today and is likely on its way to 26.10

USD/RMB

If you want to know why? Look no further than the Chinese Renminbi to the U.S. dollar.  Whoops.. 6.70 to the dollar on the way?

Square (SQ)

I think it is may be safe to say that Square is now breaking out and could be on its way $75. Of course, now that I said that, it will likely go down. 🙂

Open interest on the March 65 and 80 calls increased by about 5,000 today, for each. According to data from Trade Alert, the pair of options traded on the ask, which suggests buying to open. A buyer of the $65 would need the stock to rise to $72 to breakeven, and a buyer of the $80 calls would need the shares to increase to $82 to breakeven.

Starbucks (SBUX)

There were some bullish bets in Starbucks yesterday too, with open interest rising on the Starbucks March $67.5 calls by 10,000 contracts, and the March $60 puts rising by roughly 10,000 contracts. So at first, it would seem to be neutral, but again, when looking at the transactions, we learn that this was a very bullish bet. According to Trade Alert, the calls traded on the ask for $1.10 and the puts traded on the bid at $1.44. In short, the trader bought the calls and sold the puts, and took in a premium of about $0.35. For the calls to earn a profit, the stock would need to rise above $68.60. Again the bet here is that the stock stays above $60, and even better the stock rises above $68.60.

The chart looks bullish to and suggests it rises back to its highs around $70.

Facebook (FB)

Facebook continues to rise and is now approaching resistance at $148.75. If the stock can manage to rise above that, we could be looking at a move to $157.50. At that point, we may need to think about whether the worst is behind the company.

Acadia (ACAD)

Acadia finally broke out rising above $18.50 and appear it can now attempt $21.

I read the transcript from the JP Morgan healthcare conference, and I can say the story Steven Davis told was different and positive. Something, honestly, I’m not used to from the company. Something changed somewhere in investor relations. Additionally, what likely got the stock going was on slide 11, it shows steadily Nuplazid growth. It would be better if they actually provided a scale to see what the numbers are, but, certainly more transparency than in the past.

Night!

-Mike

Photo From Flickr

Disclaimer: Mott Capital Management, LLC is a registered investment adviser. 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. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Past performance is not indicative of future results.