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The Bear’s May Be Making Their Last Stand At Breaking The Stock Market
MICHAEL KRAMER AND THE CLIENTS OF MOTT CAPITAL OWN AAPL, NFLX,MO
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Stocks Get Walloped
What a brutal day Wednesday was for the stock market, but the S&P 500 did manage to close well off its lows. The good news again, 2,794 continues to be an area of straight for the index, and that may be key. Wednesday marked the sixth time sellers have tested 2,794 July 16, the longer it holds, the more likely the bears give up trying to break it. In some regard’s this may be the bears’ last attempt to crack the equity market. If they are unsuccessful, then one has to wonder what keep’s equity prices from not rising going into the final few months of 2018.
Inflation
The dollar moved higher once again, with the dollar the index touching 97 today, putting further pressure on commodities like oil, copper, and gold. The inflation narrative is looking weaker by the day. Oil prices are now nearly 14 percent off their highs from early July, and look like they will plunge even lower, to perhaps $61. The answer to the oil mystery lies in the chart below and maybe this simple. Since 1986, the trade weight U.S. Dollar index has a strong inverse relationship to oil prices, with a correlation of -0.76 and an R^2 of 0.58. So, for oil, it may be as simple as the dollar rises, oil falls, period. There may be influences outside of that for a short period of time, but over the longer-term, the dollar oil relationship seems obvious.
I talk more about this relationship in the member video: The Dollar May Soon Wreak Havoc On Oil And Gold
Yields
With the prices of commodities continuing fall, 10-year yields also continue to retreat, flight to safety or not. The US 10-year now stands at 2.85%, and the treasury spread for the 10-year minus the 2-year is now 0.25 testing the lows we saw in mid-July. Suddenly, the bank stocks are starting to look weak.
The financial ETF (XLF) appears to be trending lower, again. That means it may once again be heading back to $26.90.
Morgan Stanley
For now, Morgan Stanley looks to be the weakest of the bunch, facing a drop to $44.
Consumer Stocks
Consumer stocks are still within the rising wedge, pointed out yesterday. The best case scenario a big bounce tomorrow followed by a rise above $114.
Amazon
Amazon is now in search of support around $1841, and should that not hold $1740 is on the way. I talked more about the chart for Amazon in the member video today, and the lot of other stocks, such as Netflix, Tesla, Alibaba. Amazon May Plunge 10%
Netflix
Netflix managed to fall to the technical downtrend, and for the moment stopped. I’m hoping this is merely a retest of the break out I noted last week and not a sign of more declines. The next area of support is somewhere around $306.
Micron
The hopes of a Micron break out seem to be over, and it appears I got this one pretty badly wrong at this point. The areas to watch now to the downside is around $45.24. UGH! I hate when this happens, but it happens.
Apple
One stock that performed very well on Wed. Apple, and it is working very hard to break out, and succeeding.
Risk-on – Risk-off
Biotechs are looking weak these days and so are the semis, and that would suggest to me that the market has turned back to a risk-off state. When looking at the chart’s side by side, they do not seem all that dissimilar. We need this mentality to change.
The money appears to be flowing back into the staples, like P&G and Altria. It may be the markets way of saying it too is expecting rates on the long-end of the curve to continue to fall. Falling interest rates mean stocks with high dividends need to adjust lower, and that sends stocks prices higher.
That is all for today. Back tomorrow.
-Mike
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Here are some of the recent videos:
The Dollar May Soon Wreak Havoc On Oil And Gold
Inflation Runs Rampant Only In Fantasyland And That Is Good For Stocks
Tesla May Be Going Higher Regardless Of The Bid
Why The S&P 500 May Rise To 3,500
Netflix Is Not Broken, Plus S&P May Rise To 3,000 Sooner Than You Think
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#SP500 #amazon #netflix #tesla #
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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. 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.
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