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#STOCKS – $AAPL, $ARKK
#MACRO – $SPY, $DXY, $VIX, $SPYG, $SPYV, $TIP
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MICHAEL KRAMER AND THE CLIENTS OF MOTT CAPITAL OWN APPLE
The S&P 500 finished today lower by around 20 bps. Today was about rising rates and a stronger dollar. Surprisingly, the VIX moved lower by 1%, which is odd, given Powell’s appearance tomorrow.
But looks can be deceiving because we live in a world where the S&P 500 has an expiration date every day of the week. So why buy puts 30 days from now when you can purchase hedges for tomorrow and worry about what comes next later? So with that type of mentality, you can understand why implied volatility for tomorrow’s S&P 500 expiration date is rising sharply and why the VIX is down. If Powell has a Jackson hole tone, which I think he will, then that entire volatility curve should rise sharply tomorrow and the VIX with it.
The dollar seems to influence the S&P 500 more than anything else these days. The dollar has snapped back the past two days, which has me again saying I think the dollar has bottomed. Maybe I am stubbornly bullish on the dollar, but I know Powell needs financial conditions to tighten, and the dollar plays a significant role in financial conditions tightening. So if Powell delivers that hawkish message tomorrow, the dollar should rise. I’d like to see the DXY get back to 110 or so.
S&P 500 (SPY)
If the dollar makes it back to 110, it will inflict much pain on the equity market and probably result in that gap filling at 3,750. Nothing new from me, as I have been looking for a gap fill to 3,750 since the November options expiration date.
We also saw a good move higher in rates today, which helped push the TIP ETF lower. The TIP ETF has not been a factor now for some time and has been trading sideways. The TIP traded sideways, heading into Jackson Hole for about two months. The TIP ETF has traded sideways for about two months, heading into the Powell Q&A session tomorrow. Maybe the TIP ETF will wake up tomorrow. Again, real rates need to rise to tighten financial conditions.
Growth To Value (SPYG to SPYV)
The SPYG to SPYV ratio has already started to fill the gap from the November 10 CPI reading.
Apple is on the cusp of breaking down and filling the gap from November 10.
The ARKK ETF also looks like it has started to fill the gap.
If Powell does his job of tightening financial conditions tomorrow, volatility should rise, rates should increase, the dollar should strengthen, and the S&P 500 should fall and move lower towards 3,750.
Have a good night
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. Past performance of an index is not an indication or guarantee of future results. It is not possible to invest directly in an index. Exposure to an asset class represented by an index may be available through investable instruments based on that index. 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.