MARCH 5, 2021

STOCKS – n/a

MACRO – SPY, QQQ

Mike’s Reading The Markets (RTM) Premium Content – FREE 2-WEEK TRIAL

• The Fed Is Likely To Remain On Hold At Its March Meeting
• Live Stream Will Start At 1:10 PM ET
• MORNING NOTE: WATCH FOR THE GAP FILL
• MIDDAY VIDEO- BONDS MAY PUNISH POWELL
• MIDDAY NOTE: YIELDS CONTINUE TO RISE
• Morning Note: This Can Still Grow Much Worse
• Morning Notes: Yield Curve Suggest A Market Top Is Near

It was a pretty crazy day of trading, with the S&P 500 jumping by 2% after plunging more than 1% to start the day. Today was more about volatility levels imploding and short-covering than I think a real rally driven by true buying.

But the NASDAQ was where most of the action was, and we can see that Qs hit support at $297 and managed to bounce nicely off it, rising back to resistance around $310.

It seems entirely possible that the NASDAQ continues the strength seen today, rising back to the downtrend around $316, or perhaps even to $319.50. I’m not sure that changes much though over the next couple of weeks though. The November and March uptrends are broken on the Qs, and that is not ideally what one wants to see.  It seems that any rallies are likely to be still sold, and the trend is still lower for now.

Additionally, despite the rough drawdown in technology, the sector made no headway against the 10-year. The S&P 500 IT sector’s earnings yield rose this week to 3.9%, but the premium over the 10-year remained around 2.40%.

Yields stalled out today around 1.6%, and they are really getting overbought here. Could they go higher, yes, much higher. A pullback to 1.5% or even 1.3% isn’t out of the realm of possibility. It could even help provide the equity market a boost as I mentioned above.

But there are still plenty of people looking to short the 10-year, with the overnight repo rate negative. It is telling us a lot of people are looking to borrow the 10-year to go short. So that means for now, the pain trade likely means yields move higher.

Anyway, more this weekend.

Mike