The Stock Market Is Like A Sea Of Tranquility Waiting To Be Stirred

S&P 500

Stocks pushed higher to close up about 22 bps on the SPX. It is the case of the dwindling and disappearing volume in the equity market. Futures volume in the e-minis has dropped dramatically and appears to be at the lower end of the range over the past few months. It tells us that it doesn’t take much effort to move the market higher at this moment in time.

It makes it easier, I guess, for the equity market to convince itself that Powell is going to be dovish on Friday morning because the meeting is now virtual.

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Meanwhile, the equity market appears to be clueless about what is happening in every other corner of the macro landscape. Bonds, currency, volatility, and the international markets seem to be positioned in such a manner that would suggest a tapering signal is expected.

Take yields; for example, bond yield rose sharply today, climbing to 1.35%. It looks like a breakout to me, and that once it clears1.40, the path to 1.55% gets pretty easy. The RSI is bullish and broke free of that long-term downtrend that starts in March. The 2-year had a big move today, and the only thing that would push the 2-year yield higher at this point is in preparation for the Fed to taper.

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Micron (MU)

Micron shot up today after they reported that Western Digital was in talks with Kioxia. Micron rose right to the 50-day moving average and resistance around $75 and crumbled once it reached that price. I really don’t see much changing for Micron, and I think the failed breakout attempt on the news confirms the bearish view I hold.

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Salesforce (CRM)

Salesforce blew out results today, with non-GAAP earnings of $1.48 per share, which was $0.55 per share better than estimates. No surprise, right? Of course, they also had non-GAAP earnings due to mark-to-market accounting, which accounted for $0.43 of that big beat. Still a beat, by $0.12 when you factor that out, but given that the stock moved up more than 11% since the middle of July, Revenue beat too, coming at $6.34 billion vs. estimates of $6.24 billion. Revenue guidance for the year was in line. I’d be surprised if the stock traded over resistance tomorrow at $267.

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I shared this chart with members the other day. It is the Nasdaq McClellan Summation. It shows what we have talked a lot about here, which is the weak breadth of the market. The chart shows that the summation has broken down and really decoupled from the broader Nasdaq. It also shows that given the recent reading of that index, one would think the Nasdaq was down a lot. The last time the summation index was this low on the Nasdaq was in March 2020, December 2018, February 2016, August 2015, and June 2012. During that period of time, I know the market was like a sea of tranquility, but really quite the opposite. So here we are, with the NASDAQ trading at a record high. Probably means nothing, right?!

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Disclosure: Mott Capital Management, LLC is a registered investment adviser. Information ...

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