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This week won’t have much on the economic calendar, with the S&P Global Flash PMI the lone standout data point. Government auctions will draw more attention. While recent debt issuances at the long end of the curve have gone well, the real test will be in the belly of the curve, with the 2-, 5-, and 7-year auctions scheduled this week. One reason for the increased attention is that yields in the belly of the curve are significantly lower than they were just a month ago. Given the uncertainty surrounding nearly everything these days, it will be interesting to see if demand holds up.
Meanwhile, the spread between the 10-year and 2-year yields has significantly widened in recent weeks and is now at one of its highest points since February 2022. One could easily argue that it may steepen even further in the weeks ahead, meaning either the 2-year rate falls further or the 10-year rate rises substantially. This again underscores the importance of this week’s Treasury auctions.
The dollar also appears vulnerable these days, with USDJPY declining and nearing a significant support level at 142. A strong case could be made that USDJPY has formed a head-and-shoulders pattern. If 142 breaks, the measured move suggests the yen could strengthen considerably, driving USDJPY toward 121.
Meanwhile, it certainly appears the S&P 500 has begun a Wave 5 down. Even more intriguing is that measuring from the intraday low of 3,491 on October 13, 2022, to the intraday high of 6,147 on February 19, 2025, gives a 61.8% retracement level of 4,506.
Additionally, projecting a 100% extension of Wave 3, which started on March 25, 2025, and ended on April 7, 2025, from the top of Wave 4 on April 9, 2025, provides a downside target of 4,516.
If you also measure the distance from the January 2022 high to the October 2022 low and then extend it forward, that distance aligns closely with the July 2023 high, May 2024 low, and February 2025 high. Notably, the July 2023 high was at 4,597.
Perhaps it’s just a coincidence, or maybe it’s the algos playing some advanced game—I can’t say for sure. But it could indicate we’ve witnessed a significant market top, with a potential downside target around the 4,500 region. Again, nothing new, as I’ve discussed the importance of this area for a long time, and for many different reasons.
Anyway, we’ll see what happens this week…
-Mike
Terms By ChatGPT:
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Flash PMI:
A preliminary estimate of the Purchasing Managers’ Index, indicating the direction of economic trends in manufacturing and services sectors.
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Government Auctions (Treasury auctions):
Regular events where the government sells Treasury securities (bonds, notes, bills) to investors to raise funds for public spending.
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Belly of the curve:
Refers to the middle maturities on the yield curve, typically including 2-year, 5-year, and 7-year Treasury notes.
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Steepen:
When the difference between long-term and short-term interest rates widens, indicating expectations of stronger economic growth or rising inflation.
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USDJPY:
The currency pair showing how many Japanese yen are required to purchase one US dollar.
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Head-and-shoulders pattern:
A technical chart pattern characterized by three peaks, with the central peak (head) higher than the two surrounding peaks (shoulders), often indicating a reversal in market direction.
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Wave 5:
A term from Elliott Wave Theory describing the final leg of a five-wave sequence in market price movements, often signaling the completion of a trend.
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61.8% Retracement Level:
A Fibonacci ratio frequently used in technical analysis to predict levels of price support or resistance after significant moves in asset prices.
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100% Extension:
A measured price move equal to the length of a previous wave, used in technical analysis to project potential future price targets.
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Algos (Algorithms):
Computerized trading systems that execute trades automatically based on pre-defined criteria, patterns, or mathematical calculations.
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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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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