Stocks Rise and Yields Rise As Draghi Fails To Impress The Market

September 12 – Stock mentions: SPY, AVGO, BABA, MU, FDX, BAC

Macro

The big news today was, of course, the ECB. As I said this morning, I thought it was a disappointment. Previous QE programs were much more extensive. I realize that he left the program open-ended, but I felt as if it wasn’t enough to shock the market. The market doesn’t seem to disagree with my viewpoint, either. The German 10-year yield increased all day to finish around -53 bps, which was up from around -65bps following the ECB announcement. Additionally, the euro strengthened versus the dollar.

If the market had been caught off guard or the program was seen as being able to drive rates massively lower, yields and the euro should have dropped. Instead, they all strengthened, suggesting that investors do not believe rates have further to fall.

Of course, this can change over the days, but based on the expectations I had been reading, Draghi didn’t deliver.

It will give the Fed a real chance to pull a fast one if their intent is to get the dollar weaker, which of course, we know is not their goal. However, inflation is, and the dollar has a lot of power over where inflation goes.

Markets

Some recent Macro videos in my SA Marketplace RTM, first 2 weeks free:

• The Biggest Fear Trade Is Yet To Come
• Why Stocks May Be Poised To Rise Even More
• Stocks Advances As Rates Rise
• Risk Aversion Trade Unwinding Fast

S&P 500 (SPY)

The market had a pretty solid day with the S&P 500 rising by about 30bps. It had been up more during the day but gave a good amount back by days end. You can see in the chart that the S&P 500 is rising in a channel, and it would suggest to me that more gains are on the way. My view has not changed.

In fact, it is beginning to become that the trade war may be coming to and that may be setting the next part of the rally higher. 

Stocks

Some recent articles on Stocks in my SA Marketplace RTM, first 2 weeks free

• JD.Com Seeing Bullish Betting
• Intel Is Nearing A Big Break Out
• Netflix Still Has Some Life Left
• AMD Stock Is Looking Very Weak
• Betting Square Falls
• Why Freeport And Copper May Be Heading Higher

Broadcom (AVGO)

Broadcom reported results. Unfortunately, they don’t break out their semiconductor units any more in the PR, which is a disappointment. I didn’t see anything that stood out to me. The stock is down slightly after hours to around $295. The one bright spots for the semis is that the company hasn’t the business get any worse.  $290 should continue to act as support.

Alibaba (BABA)

Alibaba had a good day and is close to rising above resistance at $180. The next level of resistance comes at $188. Premium content: JD.Com Seeing Bullish Betting

Bank of America (BAC)

Bank of America continues to rise, crossing over resistance at $29.50. The next level comes at $31. As long as rates rise and spreads widen, the stock can work higher.

Micron (MU)

Micron stalled out today, but with earnings coming, I think the stock can work higher towards $54 still.

Federal Express (FDX)

FederalExpress is looking pretty good recently; maybe it can even get back to $185.

Have a good night!

-mike