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The Bond and Curreny Market May Be A Better Guide on Trade Tensions

The Bond and Currency Markets May Be Better To Watch on Trade Tensions

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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Michael Kramer and Clients of Mott Capital own Netflix

May 9, 2019

Stock Mentions: Roku,  Amazon, Netflix, Micron, Nvidia, Alibaba, Boeing, Square

US Markets

  • S&P 500 Futures -22.50 points
  • US 10-Year 2.44%
  • Dollar Index 97.57
  • VIX 21.61
  • Oil $61.94

International Markets

  • Japan Nikkei -0.93%
  • China Shanghai -1.48%
  • Hong Kong HSI -2.39%
  • South Korea KOSPI -3%
  • Germany DAX -0.79%
  • UK FTSE -0.46%

Global Markets

Markets in Asia have broken down, and what had been positive setups have turned decisively bearish. We can see that the South Korea Kospi has fallen through a level of support at 2,121. At this point, the index needs to stabilize or risks an even further drop. The downturn in the market is a negative development for the global economy.

kospi, stock market

Shanghai

The Shanghai Composite is at a point that if it fails to stabilize the market could see a more sizeable decline to 2,650.

shanghai stock market

US Trading

It is doubtful to me that the equity market understands something more about global growth or the economic outlook than the rates, oil, or FX markets. If history is our guide, the equity market is usually pretty far off base on these topics. But I guess anything is possible, maybe the equity algo’s have undergone a significant reboot. We also know that the equity market can be slow to catch on to what the rates and fx market are seeing. The rates and FX have been relatively calm this despite all the equity market volatility, in a sign that perhaps is there less to worry about than some may make it seem.

Oil

The price of oil has held up pretty firmly in recent days. The cost for a barrel of oil has thus far been stable at support around $61.70. It merely may be a pause in the recent decline, with a more significant drop to come or it may also mean that the oil market isn’t as nervous about the global growth as the equity market. 

oil,

Rates

Even interest rates have remained relatively unchanged. Certainly, there is no rush to safety.

rates,

Dollar

Meanwhile, the course of the dollar’s strength appears to be unchanged as well.

dollar

S&P 500 (SPY)

The equity market is another story; it seems to be much more nervous. For now, it would seem that at the very least we are going to get a retest of the S&P 500 lows from the other day around 2,863. Whether it holds or bounces will be the key. A drop below 2,863 opens the door to 2,830 and blows my model out of the water.

S&P 500, spy

Russell (IWM)

The Russell also appears to be heading towards its lows around 1,560

russell, rut

Roku (ROKU)

Roku is popping to resistance at roughly $70.75 this morning after reporting better than expected results.  I think given the weakness in the market it may be tough for the stock to rise above that resistance level today.

roku stock

Amazon (AMZN)

Amazon is at a point where it needs to move higher or is on the cusp of breaking down. $1900 is the key, and it needs to hold the uptrend.

amazon, amzn

Netflix (NFLX)

Netflix is also heading towards the lower end of its trading range at roughly $355.

netflix, stock

Micron (MU)

Micron is starting to break down now, and the risk for the stock falling to around $36 is growing.

micron, mu

Alibaba (BABA)

Alibaba has turned decidedly negative and is now trading below support at $179 and that ups the potential for the stock to fall to around $166.

baba, alibaba stocks

Nvidia (NVDA)

Nvidia is on the cusp of a significant break down which could send the stock back to $150. Nvidia Is On Shaky Ground Heading Into Results

nviida, nvda

Square (SQ)

Should square drop below $65.50, it ups the potential the stock drops to $61.

square, sq

Boeing (BA)

Boeing’s stock continues to look weak with the potential for that drop to $320. Boeing Is Breaking Down

boeing, ba

Hang in there, it feels worse than it is.

-Mike

Mott Capital Management, LLC is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Past performance is not indicative of future results.