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Stocks Sink on June 1 as Rates and The Dollar Surge

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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6/1/22

STOCKS – JPM, SPGI, BMY

MACRO – QQQ, TIP

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The S&P 500 finished lower by 75 bps today to close at 4,101. The index plunged following the ISM report showing the Fed has made nearly no progress in its attempt to slow economic growth or reign in inflation. That sent the dollar and yields soaring. The weak dollar and falling rates helped push stocks higher last. This week, the stronger dollar and rising rates are helping to sink stocks. As long as the path of the dollar and rates remain higher, the course for stocks may remain lower.

Again, one of the easiest ways to visualize this relationship is to look at the TIP ETF vs. the QQQ ETF. The two have tracked each other nearly perfectly since the winter of 2018. When the TIP has made new highs, the QQQ made a new high for years. Now, as the TIP has reversed, the QQQ has reversed. Interestingly the TIP made a new closing low today. If the pattern continues, it would indicate that a new low for the QQQ may only be around the corner.

It doesn’t mean the QQQ has to make a new low, but given the strength of the relationship over the years, the odds seem high it does.

JPMorgan (JPM)

As hot as the banks were last week, this week they are not. JPMorgan fell by almost 2% today after its CEO Jamie Dimon warned of an economic hurricane coming. After the stock hit its 61.8% retracement level yesterday, the rally could be over after forming a bearish engulfing candle today. If that were the end of the rally, I would not be surprised to see the stock trading sub-$115 again.

S&P Global (SPGI)

Today, S&P Global fell by 5% after it pulled its 2022 financial guidance on weak debt issuances. The stock initially fell to technical support at $310 and bounced hard to close at $332. The momentum on the RSI looks very bearish, in my opinion, leaving me to think that $310 may be tested again soon.

Bristol (BMY)

Finally, I haven’t looked at Bristol-Myers in a long time, and you can see the stock has been trading sideways for some time and is now making a bearish divergence with that relative strength index turning sharply lower. There is also a gap that needs to be filled, around $70.

Have a good night

Mike

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. 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.