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Exploding Interest Rates May Finally Suck Stocks Lower

By Michael KramerStock MarketsAug 12, 2022 03:38AM ET
www.investing.com/analysis/exploding-interest-rates-may-finally-suck-stocks-lower-200628408
Exploding Interest Rates May Finally Suck Stocks Lower
By Michael Kramer   |  Aug 12, 2022 03:38AM ET
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US500
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TSLA
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XBI
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SHOP
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TIP
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Stocks moved lower yesterday, despite moving sharply higher to start. The PPI reading came in weaker than expected. Stocks initially rallied on the news, and yields fell. But once the market settled down, rates started to increase, which was the day’s big story. Interestingly, we have seen a “peak” inflation narrative, and despite a miss on CPI and PPI, we are now seeing rates rise. Could this indicate that rates have stopped decreasing and will be heading higher from here? I believe so because if weaker than expected inflation data can’t send rates down, they have one way to go, which is up.

Also, yesterday’s 30-year auction did not go well, and that added to the big move higher in yields. It could prove to be a turning point for the rates because if the 30-year has broken out, and it appears that it has and is heading higher from here, we could see rates across the curve move higher, and the curve re-steepen.

US 30-Yr Daily Chart
US 30-Yr Daily Chart

TLT / LQD

The move higher in rates pushed the TLT sharply lower yesterday, which sent the LQD sharply lower and put it back into a critical support region at $113. Again, a break of $113 would signal that lower prices are coming for the ETF, implying that rates for corporates go higher, which would go with a narrative of higher rates on Treasury yields.

LQD Daily Chart
LQD Daily Chart

Additionally, real yields were on the rise again today, with the TIP ETF dropping, which helped to turn the Nasdaq lower yesterday. If real yields keep rising, the QQQ will be pulled lower. The QQQ has risen, partially because the TIP increased over the past couple of weeks and has been mostly range bound. But I don’t see how the TIP starts heading back to its lows, and the QQQ doesn’t get sucked lower too.

TIP ETF Daily Chart
TIP ETF Daily Chart

S&P 500

As for the S&P 500, if we are starting to see rates move higher in yields to account for this sticky inflation and no recession narrative, we should start financial conditions to begin to tighten again. With that, I think we have seen the highs. Could we go back to retest them at some point? Sure, but I believe that 4,260 area is about it, and I still think we will see 3,950 over the next couple of weeks.

S&P 500 Futures Daily Chart
S&P 500 Futures Daily Chart

Shopify

There was a pretty notable reversal in Shopify (NYSE:SHOP) yesterday, and we saw that across several stocks. I think this resulted from the higher real rates, so it is time to start paying attention to the TIP ETF. Maybe the reversal in SHOP was just a gap fill, but there is another gap at $37 too.

Shopify Inc, 1-Hr Chart
Shopify Inc, 1-Hr Chart

Biotech

The XBI also put in a double top on the hourly chart and hit the upper end of the trading channel. If there is going to be a turn lower in the XBI, this is as good of a spot as any.

XBI 1-Hr Chart
XBI 1-Hr Chart

Tesla

Tesla (NASDAQ:TSLA) could be heading lower here. The shares had been trending higher but peaked on August 4 and have sat out this recent leg of the rally. The RSI is starting to head lower, and yes, a gap at $740 needs to be filled.

Tesla Daily Chart
Tesla Daily Chart

Have a good one

Original Post

Exploding Interest Rates May Finally Suck Stocks Lower
 

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Exploding Interest Rates May Finally Suck Stocks Lower

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Comments (10)
Mohd Izhar Muslim
Mohd Izhar Muslim Aug 14, 2022 8:28AM ET
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Thank you for sharing the article 💯
Samer Diab
Samer Diab Aug 14, 2022 8:08AM ET
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noob Michael also writes on seeking alpha. he is always bearish. never bothers to look at the charts or the fact that the s&p closed above its 50% retracement indicating that the bottom was June 17th
taylor jason
taylor jason Aug 14, 2022 8:08AM ET
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50% retracements means absolutely nothing lol. there have been a total of 26 bear market rallies, which the average wad 23%. there were also two that exceed 40% and one that exceeded 50% between years 2000 and 2002.
Artemis Arrow
Artemis Arrow Aug 13, 2022 2:38AM ET
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neck yourself ugly
Kine tic
Kine tic Aug 13, 2022 2:38AM ET
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Waaaaaa! dont break My Illusion.🤡
Mario tragik
Mario tragik Aug 12, 2022 5:11PM ET
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oh where oh where is Kramer, come out come out wherever youuu are. lol stop following this guy blindly he is dead wrong most of the time. i can only imagine how you are doing if you have shorted following his advice.
Jesper Davidsen
Jesper Davidsen Aug 12, 2022 10:22AM ET
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Naahhh still didnt vet it right. MayeBe next time?
King Agamemnon
King_Agamemnon Aug 12, 2022 8:41AM ET
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166030791914244.jpg
Until AAPL puts in a top this market will keep short squeezing the bears. It's so close to the prior highs I think it may as well go retest them. There are probably a lot of bears that are shorting the AAPL retrace and will get blasted at the highs and kick this market up higher through 4300 and possibly 4600. The economy ********but the market is not the economy.
Kris Jay
Kris Jay Aug 12, 2022 8:41AM ET
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could be right.  well the market should reflect the economy but there is so much excess cash around it is driving the market up despite earnings in Q3 will be dismal and hikes will keep coming through until 2024.
King Agamemnon
King_Agamemnon Aug 12, 2022 8:41AM ET
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Kris Jay  the markets have been turbo rigged for the last 10 years. 100 billion a month in FED treasury and MBS purchases until this summer. LOL at honest markets.
Mario tragik
Mario tragik Aug 12, 2022 8:41AM ET
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if the market reflect the economy then it would be to easy and there would be no market.
Kris Jay
Kris Jay Aug 12, 2022 8:27AM ET
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I like this Kramer more than the other Cramer.    I think you're right but so far, we are both wrong as markets moving higher.
Jimmy John
Jimmy John Aug 12, 2022 8:04AM ET
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Can they keep it up until after November with Powell’s viagra?
Mario tragik
Mario tragik Aug 12, 2022 6:12AM ET
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try again kramer
David Beckham
David Beckham Aug 12, 2022 4:22AM ET
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Good all in short now
 
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