Stocks – AMZN, WFC, NVDA
Macro – SPY, PPLT
- MIDDAY – Bonds And The Dollar Don’t Seem As Excited As The Equity Market
- Link To Live Broadcast Starting 5 Mins
- Morning Note – Yields Are Rising And Are The Biggest Risk To Equities
- Midday- Stocks And Yields Both Rising
- Morning Note- Stocks May Slide For Second Day In A Row
- Educational Content – How I Use Fundamental Analysis
- Midday- Stocks Break As Volatility Soars
A monster rotation took place in the market today, as Democrats secured control of the Senate, giving control of the three government branches. As a result, we saw the reflation/stimulus trade put in place.
It led to a big rally on the S&P 500, which advanced by around 60 bps, but had been much higher before Washington’s events shifted market risk. Despite the disruption, we still got a pretty good sense of what was taking place in the market today.
The bond market and currency market didn’t appear to have the same excitement as the equity market, with the 10-year rising sharply to around 1.05%, a big move considering it was around 90 bps just a few days ago. Meanwhile, the dollar gave back some pretty big gains.
Based on my understanding, it seems likely that another round of stimulus will likely be passed at some point, and that is why we are seeing yields rising and the dollar falling.
Now ordinarily, we have been told stimulus is good for the equity markets. But at some rising rates, and a falling dollar will pose a problem for equities. Maybe not all equities, but certainly for those trading equities at the upper tier of PE multiple expansion. That is what I worry about most.
I know to some people it would seem like the big deal if rates go from 90 bps to 1.3%. Well, it does. At least by my math, a 40 bps increase in the 10-year would suggest that equities correct by roughly 10-12%. That is assuming earnings stay unchanged.
So we need to pay attention to these minor trends and signals the whole market is sending. Right now, the equity market may not be picking up the subtleties.
Interestingly, just as the market fell sharply on Monday, as the VIX rose sharply, today was the exact opposite, with the S&P 500 futures literally rose back to where it was on Monday before the start sell-off. Coincidence probably not. Does it mean something, not sure yet? But that 3,775 is clearly a strong level of resistance for now.
We can see that the 30-year yield that the year popped today to and likely broken out, and with the next stop around 1.91%.
Still, the market had a massive rotation trade that sent financials, and small-cap stocks soar.
I included the wrong chart of Platinum yesterday, so here it is.
Amazon comes to an inflection point, with the stock at a critical resistance level of around 3,140. If you can manage to hold on to that level and bounce, it would be a big positive. However, a break of support probably sets up that decline towards 2,870 I have mentioned in the past.
Wells Fargo (WFC)
Wells Fargo had a huge move higher, pushing to around $33.25, a big resistance level. The stock has failed here two prior times, so it is essential it finally breaks out. If it does, that is a lot of room for it to run higher.
Nvidia fell through a key level today, falling below support at $515. It appears to have completed and confirmed the bearish triangle pattern. I have been looking for $460 for some time.
Anyway, take care.
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