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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August 27, 2020
STOCKS – MSFT
Macro – SPY, LQD, GLD
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MICHAEL KRAMER AND THE CLIENTS OF MOTT CAPITAL OWN TSLA
MICHAEL KRAMER OWNS A QQQ PUT
It was a mixed day of trading with the S&P 500 rising and the NASDAQ 100 falling. If you were hoping for some big from Powell today, you didn’t get it. Frankly, I’m surprised the equity market didn’t respond. The 10-year did, as did the dollar, and inflation assets. But equity’s are just on another planet.
Powell gave his average inflation targeting speech but offered little in the way of details on how it would be calculated, or how long of a time frame they’d use to measure it. In my view, all they did was replace the word symmetric with average. Regarding, unemployment again nothing new from what I can tell. Nothing to suggest more easy money was on the way. The balance sheet has been stagnating for weeks now.
The 10-Year surged to around 76 bps.
Meanwhile, the dollar index did move up just a little bit but needed to get over 93.50. If rates keep climbing, they should break out.
Gold initially spiked and then sold off, and continues to get closer to a break lower, which should come if yields and the dollar rises.
When you piece all of this stuff together, it tells you that the market doesn’t see more easy money coming anytime soon. If there isn’t more easy money coming in the form of QE, then it means rates can begin to rise from here, maybe even back to 1%.
The earnings yield premium to the 10-year Treasury is part of the narrative on higher equity prices. So if yields start rising, that means that spread narrows more and that means multiples contract.
The LQD is moving lower as rates move higher, and not keeping pace with the S&P 500.
Meanwhile, the RSI on the S&P 500 is now at 77.3. Yep, keep on going.
Well, it didn’t take long for Microsoft to break out and push to the $232 level, we talked about the other day.
Anyway, that’s all.
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