The Stock Market May Be Gearing Up For A Sharp Rebound

Yields

I’m going to make one more point about the yield curve and inversion. One day of a yield curve inversion doesn’t mean a recession is coming. It takes several months or even years for an inversion to represent a potential recession. One day means nothing. As the chart below shows from the time the curve inverted to the recession in some case took over 600 days! So I think it is safe to say a lot can happen between now and 2021. Plus the 10-2 year hasn’t even invert yet.

I hope we are not going to be hearing about the “inverted yield curve” for the next 2-years. 

(Click on image to enlarge)

inversion

S&P 500 (SPY)

Stocks did a lot of nothing on the surface, but there were a lot of positive developments that took place that may suggest the days of doom are not on the way. In fact, after seeing the day of trading after Friday’s sharp sell-off, I’m incrementally more positive on the market.

We can see in the chart below that the S&P 500 tested a prior break out region around 2,785 today on two occasions. Each time the bulls managed to hold firm, and the market lifted. The chart also shows that the S&P 500 broke that short-term downtrend that had been in place since Thursday. It leaves me believing the Algo’s will work to fill the gap up to 2,852 in the coming days.

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S&P 500, spy

Russell 2000 (IWM)

We can also see that the Russell 2000 fell right to support at 1,492 today and held firm another bullish sign. Should the index rise above 1,521, we can look for a sharp move to 1562.

(Click on image to enlarge)

Russell 2000, rut

Housing (HGX)

Do you know what sector does very well in a low-interest rate environment? Housing –because mortgages rates get cheaper. The Housing sector index HGX continues to rise, moving above its downtrend today and could be on its way to 295.

(Click on image to enlarge)

housing, hgx

Apple (AAPL)

I watched most of the Apple event; it was very dull to be truthful. I didn’t see anything that got me excited. The credit card part of the business seems interesting, but I’m wondering with no fees how will Apple enforce people paying their bills at all? With interest? Maybe tighter credit limits? Also, my instinct says that the vendor will carry the cost of no late fees and lower interest rates by having to pay higher transactions cost.

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Disclosure: Michael Kramer and clients of Mott Capital own Apple, Mastercard, and Netflix. Michael Kramer owns SPY Calls.

Disclaimer: This article is my opinion and expresses my views. Those views ...

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