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The Monster Look At The Week Ahead In Stocks For October 8
MICHAEL KRAMER AND THE CLIENTS OF MOTT CAPITAL OWN SHARES OF AAPL, GOOGL, AND NFLX
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Treasury yields will undoubtedly be the most important indicator to watch this week to decide whether stocks will rise or fall. But Monday will not be the day to do that because the bond market is closed. It may give equities a chance to rebound a bit and find their footing. There will also be plenty of inflation data out this week with the PPI on Wednesday and CPI on Thursday. Those two reading may be of particular importance for the direction of yields for the balance of the month.
The 10-year hit a critical level of resistance around 3.25%, and if my chart is correct, we should see yields fall back to about 2.95% over the course of the next few weeks.
Dollar
The dollar will be the second most important metric to watch to gain a sense of confirmation in bond yields. Rising yields should be bullish for the dollar, and that should result in the dollar strengthening further against currencies such as the euro and yen. The dollar index has had a healthy 2018, but has stalled out in recent weeks and suggests at the moment that the current rise in rates is likely not to last. The technical chart indicates at the moment that dollar, at least over the short-term, will continue to fall perhaps slightly to around 94.
Spreads
The next chart below shows just how tight the yield curve has become in 2018 versus previous years. It is one of the primary reason the banks have performed so poorly in 2018. (Read more: Banks and Industrial Stocks Continue To Break Down As Outlook Worsens .)
More Spreads
The next chart shows precisely why the dollar has strengthened so much this year as well. We can see the outperformance of US yields versus other major global currencies and as long as this trend continues the dollar should continue to strengthen.
It is also worth noting that the spread between the German and US 10 year yields is at the widest point since the last 1980’s when rates and inflation were at higher levels.
Stocks
When we consider stocks in the market that are critical to its health we must look directly at the most significant components for these are the generals. We can assume that the forecast for the current quarters and balances of the year are relatively unchanged. That only things that may have changed are the markets willingness to give further multiple expansion or perhaps less multiple expansion.
Apple (AAPL)
Apple stock as successfully tested support around the $217 price many times and we can see there is a solid uptrend in place for the stock which the shares bounced sharply off during the lows of Friday.
Amazon (AMZN)
Amazon is another stock that is of critical importance to the market due to its monster market cap. This chart is more troubled than that of Apple. If there is one glimmer of hope, it is that the stock found a bounce around its earlier lows last week around $1860. If the stock can manage to stay above these levels, then it should be viewed as positive. But if the stock is unable to stay above $1860, it would seem there is an excellent chance more declines are ahead.
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[youtube-feed feed=7]Alphabet (GOOGL)
Alphabet is another critical stock to watch that must stay  above $1154.
Risk-on
Another group that must perform well are the risk on groups such as the biotech and semiconductors stock which we highlighted in yesterday commentary. (Read more here: 7 Stocks Must Watch Stocks To Start The Week Of October 8. ) These are two groups that may help to gauge the risk appetite for the market given their high levels of volatility. Should these two groups continue to drift lower, it would suggest that the  risk appetite is continuing to diminish.
Netflix (NFLX)
Netflix is another stock to watch because it has been among the leaders this year. The company is due to report results on October 16, and there should be plenty of analysts notes coming out this week ahead of those results. If bullish, they should give a firm bid in the stock.
The term Netflix subscription in Google trends continues to stay strong although lower than its peak in July. Last quarter I misinterpreted Google trends and let my emotions get the better of me thinking the big surge at the start of July would be reflected in the second quarter results. Second quarter results were disappointing. But there was a tremendous surge in the term Netflix subscription in early July,
Meanwhile India appears to be the hottest of the markets.
I realize I went a bit off topic here but a strong move higher in Netflix should surely be a positive for the broader market as well.
That is going to be all I have the time for today. But good luck this week.
Back tomorrow
-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.
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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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