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Stocks Rally Back On October 5, 2022 Despite Rising Rates And Stronger Dollar

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10/5/22

#STOCKS – $ARKK, $XBI, $TSLA

MACRO – $SPY, #RATES

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Sort of a strange day, with markets moving lower to start the day as rates and the dollar increased. The better-than-expected ISM data added to the downturn. Then after the European market close, the dollar started to give back, and the S&P 500 moved off the lows and finished down just 20 bps, despite being down more than 1.6%.

From a technical standpoint, nothing much changed when the S&P 500 gapped lower and filled the gap. The jobs data on Friday is going to decide the next leg of the market, and after reviewing the ISM data, and after Brain Deese said the labor market is showing resilience with some cooling; there is a good chance, I think, the job number comes in better than expected. The ISM services employment index shows that in the last couple of months, the ISM employment index has improved, making me wonder if the job report comes in hotter than the forecasted 260,000.

If you push that ISM employment index back a month, you can see the changes in the employment index are pretty good at predicting the direction of the change in the BLS job report and that the ISM employment index has risen steadily for the past three months. It is worth thinking about, and if that is the case, then the move higher in rates and the dollar today is only the start.

From a technical point of view, nothing changed on the S&P 500. The resistance level at 3806 held, and the big move up mid-day came on minimal volume from what I can tell.

2-Yr

The 2-year has consolidated around 4.15 to 4.25% level and could be in a bull flag, suggesting the next move up the 2-yr could be significant and perhaps push it to that 4.6% rate.

ARKK ETF (ARKK)

Meanwhile, ARKK is trending down and has an RSI that is trending lower, and the two suggest that ARKK is in a solid downtrend. If the ETF is falling out a bear flag from the mid-August peak, it simply hasn’t fallen enough to suggest it has bottomed.

Tesla (TSLA)

Tesla is probably going to be a drag on ARKK down too, with the news that Musk will go through with the Twitter deal. Support for Tesla is still a bit lower at $224.

Biotech (XBI)

Finally, it looks like a bear flag has formed in the XBI, which could make sense if rates start to move. This sector has been one of the more sensitive sectors when it comes to rising rates.

Have a good one.

-Mike

Charts used with the permission of Bloomberg Finance LP. 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.