The fell by around 65 bps on Tuesday, with the index getting stuck around the put wall at 6,400. It was just never able to really break free of that level, most of the day, with the exception of earlier in the morning, but even then, it quickly snapped back.
For the index to move lower today, we will need to see the put wall move lower.
The index did manage to fall below an uptrend that started at the end of June, as well as the 10-day exponential and 20-day simple moving averages. That is something that hasn’t happened very often, and so the drop on Tuesday is notable from that standpoint. Whether it can be maintained is another story entirely, so one has to be careful getting too bearish too soon.
We did manage to give back all of the gains following that Speech by Jay on August 22 at . Which is not surprising, at the time I had noted that those straight line rallies tend to get retraced. However, the index was partially saved late in the day by more than $3 billion by Imabalcne. This helped to soften the blow. The buy imbalance was likely driven by the start-of-the-month inflows.
For right now, we need to see the index close below 6,350, which would then set up a drop to 6,200.
Rates continue to move up, with the closing at 4.96% on Tuesday, while the fell to 4.13%. This led to the 30yr-3mo, rising by almost 6 bps, to finish at 83 bps. At this point, the curve is very close to seeing a significant breakout, which could lead to further steepening to around 1.25%. The form is the harder part, but I still think rates on the back of the curve have further to rise, then the front of the curve has to fall.
Meanwhile, the is very close to breaking out and moving past the high seen in April at 63 bps.
The interesting thing is that rates are rising all over the world; it is not just here in the US. In fact, they are rising much faster in places like the UK. The is now trading 73 bps over the US 30-year and has reached its widest point since October 2022, which we all remember was when Liz Truss had to resign as PM, and then you have to go back to 2011. Overall, this seems to be an important spot for this spread, given its history.
In the meantime, keep an eye on those – spreads after tightening to historic levels, the spread is starting to widen again. Where this spread goes will be a big tell for spreads globally.
Disclosure
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.