Stocks Rise As Fed Fund Futures Price In Negative Interest Rates

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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MAY 7, 2020

STOCKS – UBER, AAPL, PFE, AMD

MACRO – SPY, YIELDS, XLV

MICHAEL KRAMER AND THE CLIENTS OF MOTT CAPITAL OWN AAPL

Mike’s Reading The Markets Premium Content

The last three days seem to be a repeat of one another with late day fades. Perhaps, it is because the sellers are slowly starting to take control of the market once again, or that the number of buyers is thinning out. Whatever the case, it seems to be noticeable. 

Negative Rates

The one thing that seemed to go completely unnoticed by the stock market was how the Fed Funds Futures were now pricing in –0.03% for March 2021. Go out to June of 2021, and it is at a negative 0.045%.  PREMIUM CONTENT – FED FUNDS FUTURES PRICING IN NEGATIVE RATES – MIDDAY

fed funds

2-Year

Another interesting tidbit was the 2-year yield falling to a record low 13 basis points.  2-year

10-Year

The 10-year yield also made a move lower today, after failing two times now at the downtrend in recent days. 

10-year

Gold

Gold is also creating a bullish pennant pattern, which could result in the metal rising quickly to $1800. 

S&P 500 (SPY)

So how should we think about all of this? Well, it certainly doesn’t suggest all is rosy in the economy. It would also seem to indicate the optimism in the equity market is, well, contained only to the equity market. 

Meanwhile, the S&P 500 did finish the day higher, but that was well off the highs of the day. The index failed on the southside of the uptrend and showed the resistant level that exists. 

S&P 500, spx

Uber (UBER)

It seems like all a company has to say these days is that they are seeing signs of stabilization at the end of April, and the stock goes up massively. Uber just reported a $2.9 billion loss, which was worse than expected, and the stock is trading higher after hours. It makes a ton of sense. 

uber

Apple (AAPL)

It is starting to look more and more like Apple is forming a rising wedge pattern, and that is not a good sign for the stock or the market. A decline to $265 is still possible. 

apple, aapl

AMD (AMD)

AMD continues to struggle around $53 and seems more likely for the stock to move lower towards $49. 

AMD

Health Care (XLV)

Is that a head and shoulders pattern forming in the XLV? It looks like it, $96 will be a significant level to watch going forward. 

healh care, xlv

Pfizer (PFE)

Pfizer failed today at the downtrend and is now sitting on support at $37, with a chance to fall back to $33.85. 

pfe, pfizer

Have a good day. 

Mike

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.  

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