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The Bond Market Is Not The Only Group That Sends Out Secert Signals

The Bond Market Is Not The Only Group That Sends Out Secret Signals

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.

Otherwise, enjoy the column!

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May 29 – Stock Mentions: SMH, SWKS, FDX, JD, BABA

Michael Kramer and the clients of Mott Capital own SWKS

While the bond market sends secret smoke signals about the economy to the equity market, perhaps the chip stocks are sending a secret message of their own. (See Premium Content: What The Inverted Curve Really Means – At This Point Nothing)

Semis – (SMH)

The chips stocks have been one of the most horribly hit groups during this recent sell-off with the SMH falling a stunning 19.3% (input bear market headline here) just since April 24. But today, they did something unusual; they went up. Yes, they even went up even as the stock market appeared to plunge into the abyss. Amazing stuff.

It seems really en vogue to price everything relative to the S&P 500, so when we look at the SMH relative to the SPY, the ratio is almost back to the fourth quarter doldrums. You know, the first time we were heading to economic doom that never happened.

Oh yeah, the message. The message –perhaps the group, along with the rest of the market is starting to find a bottom and perhaps is even oversold.

smh/spy

S&P 500 (SPY)

Anyway, moving back to doom and gloom. The S&P 500 did a few things today that I found interesting. First, it managed to hold support at the 200-day moving, check. Second, it bounced off the middle downtrend line, check 2. Third, it managed to hold support at 2,768, check 3

I’m not sure alone it means much of anything. But, when you combine that with the action in the chips and it is something to at least build off.

 

S&P 500, spx

FedEx (FDX)

Throw in a dash of FedEx, and suddenly you could say perhaps we have the makings of something.

I was starting to believe that FedEx wasn’t allowed to rise anymore, but that is what it did today. Then of course when you look at FedEx relative to the SPY, you scratch your head. FedEx hasn’t traded at these levels since the recession in 2008.  You have to ask yourself are things really that bad?

fedex, fdx

Skyworks (SWKS)

When a stock is down by 30% inside of a month, and then it suddenly stops going down, and volume is drying up, you need to take notice. Of course, it could mean the stock is consolidating and getting ready for another leg lower. However, it could also mean that the stock is finding a bottom as the sellers dry up.

skyworks, swks

Alibaba (BABA)

Or you could be Alibaba, that has volume increasing despite the stock making fresh lows. That is not a good sign. It means more seller’s maybe creeping in. Careful, next stop could be $141.

alibaba, baba

China Currency (RMB)

It doesn’t particularly look good either when the RMB appears it is getting ready for its next leg lower. But don’t worry the Chinese government will crush any short-seller that bets against the yuan.   Don’t worry its totally free floating with no government intervention… OK 😆

usdcny

JD

For JD neither.

jd

…to be continued…

-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.