What You Thought Was Inflation, Is Actually Not Inflation
Growth, Long/Short Equity, Momentum, Macro
Seeking Alpha Analyst Since 2014
I am Michael Kramer, the founder of Mott Capital Management and creator of Reading The Markets, an SA Marketplace service. I focus on long-only macro themes and trends, look for long-term thematic growth investments, and use options data to find unusual activity.
I use my over 25 years of experience as a buy-side trader, analyst, and portfolio manager, to explain the twists and turns of the stock market and where it may be heading next. Additionally, I use data from top vendors to formulate my analysis, including sell-side analyst estimates and research, newsfeeds, in-depth options data, and gamma levels.
February 17, 2021
STOCKS – AAPL, WMT, XOM
MACRO – SPY, VIX, OIL
Mike’s Reading The Markets (RTM) Premium Content – FREE 2-WEEK TRIAL
- Live Session 2/19 12:30 PM ET
- What Inflation Is According To The Fed
- Midday - Rates Have Already Impacted Stocks Like Apple
- Stocks Fall On Hotter Than Expected Inflation Rates
- T.W.A – Does Volatility Lie Ahead?
- Midday: Big Move Coming One Way Or The Other
- Apple’s Stock Sees A Big Bearish Bet
- Cisco Could See Lower Prices After Results
MICHAEL KRAMER AND THE CLIENTS OF MOTT CAPITAL OWN AAPL
Strange day for stocks with the market dropping sharply at the opening following the hotter than expected producer price index. However, the S&P 500 managed to grind higher all day, filling the gap produced at the opening to finish lower by 3 bps and close at 3,931.
The rates on the 10-year climbed to around 1.34% today, which was the 2016 low. It would not be surprising to see some consolidation around this 1.3% level, or even a pullback and a retest of support around 1.2%.
Meanwhile, the VIX finished just a touch higher at 21.5 after rising as high as 23.4 Intraday.
I still believe that S&P 500 is at the top of the range, and the next likely move for the S&P 500 is lower, filling the technical gap at 3,780. The VIX continues to hold on to its trading range of 20 to 22, and I believe that will not change.
It will take a spike in the VIX to give the S&P 500 the fuel it needs to push through 3,950. Additionally, option expiration is this Friday. It seems likely that time decay in calls will force market makers to lighten up some of the there hedged positions, potentially weighing on stocks overall.
Fed Minutes
The Fed also noted that it was more than happy to let things run very hot in the minutes today. My takeaway is that what the Fed will consider inflation and what the market considers inflation will be two different things. I explain it in great detail in this video but. But those rising lumber prices, which are due to supply constraints, are not considered inflationary. Read the text of the minutes:
So only time will tell how the market responds to this. I can tell you from experience markets do not like the risk of runaway inflation rates, and what the market considers to be inflation well is up to the market. (Content for members of RTM- What Inflation Is According To The Fed)
Oil
Oil is in an extraordinary place, hitting up against resistance around $61.68 and a big downtrend, going back to late 2014. A failure at this level could be pretty big, with crude easily falling back to around $54.
Exxon (XOM)
It makes the rising triangle in Exxon potentially damaging, with a reversion to $46.20 possible.
Apple (AAPL)
Today, Apple dropped to support around $130, with the next level to watch for around $127. The uptrend in the stock is broken, and as I noted last week, there was a sizeable bearish bet on the stock. (Content for members of RTM - Apple's Stock Sees A Big Bearish Bet
Walmart (WMT)
Walmart looks like it may be breaking out after passing the downtrend and resistance at $147. A push above that level could make the stock go higher to around $150, and preferable back to its highs of around $153.
-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 results.
Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.