D&D Note (6.6.2022) ~ Morning Rally Fades as 10 Year Note Yield Rises Above 3% ~
Stocks opened the day substantially higher (around 1%) with news Beijing rolled back some COVID related restrictions. Then the rally faded throughout the day as bond traders sold the 10 Year Note sending the yield above 3%.
We could be setting for another Bear Market Rally with the big CPI report on inflation coming out this Friday. If we see inflation peaking it will boost the market to rally in the near-term.
D&D is preparing to do some trades this week ahead of Fridays inflation report. We are looking to add more to cybersecurity tech stock Palo Alto Networks, defense contractor Lockheed Martin, oil company Devon Energy, semiconductor manufacturer AMD, and yes perhaps even Rivian after the stock bounced of $20 a share which is the equivalent to their cash on the books (although we’d like to see Rivian selloff more this week back towards $20).
Natural Gas prices rise over 9% to the highest level since 2008. Some are speculating some of this recent rise is due to more Bitcoin mining.
Where does oil go when China fully reopens? Higher is the easy answer. Cargo en route to the US from China is currently 30% lower than it was a year ago and that will start reversing back after China begins to reopen. D&D sees oil hitting at least $140 in the coming months.
Housing prices have cooled with data from Redfin showing in May 1 in 5 home sellers lowered their asking price, the highest number since October 2019.
New York Governor Kathy Hochul signs law raising age to own semiautomatic rifles to 21 from 18 years old.
Has Bitcoin found a bottom? The advance over the weekend may have finally ended the 6 month slide. However, its likely this move is just a near-term Bull Trap. D&D sees Bitcoin remaining at the bottom end of the trading range for longer before mounting any sustained rally.
US has 36,000 Jynneos Monkeypox vaccine doses available in the National stockpile. San Francisco just confirmed its first case of the virus today.
Stock Specific News:
Amazon stock splits today 20 for 1 and shares rose 1.99%.
Apple WWDC kicked off today and introduces buy now pay later service causing the stock of Affirm to fall -5.18% in todays session falling the news.
Twitter deal in jeopardy as Elon Musk balks at his right to information on fake accounts. $44 Billion was the deal offer while current market cap of Twitter is now only $30 Billion. One must ask why would you sign a contract waiving due diligence and then complain later about discovery that would have been found during that due diligence. This looks like a protracted lawsuit waiting to happen.
Market Knowledge Tip:
How to create a buy/sell strategy. When you buy or sell never do it all at once. Rather split your buy/sells up into groups.
D&D usually implements a Pyramid style. When buying we are looking for stocks that are falling and buy a little bit at first (top of pyramid), then buy more (middle of pyramid), then when you have full conviction buy even more (bottom of pyramid).
Same is true for selling but reversed with an upside down pyramid as stocks rise.
Other options are simply splitting your buy into 3 equal groups to buy in stages or what is called “legging in“.
Closing Markets (as of 1:15pm PST)
DOW up 0.05%
S&P 500 up 0.31% (4,121.43)
NASDAQ up 0.40%
VIX up 1.13% to 25.07
2 Year Note up 7.37 bp to 2.73%
10 Year Note up 10.21 bp to 3.04%
Oil down -0.216% to $118.72 a barrel.
Gold down -0.314% to $1844.40 an ounce.
Bitcoin up 4.59% to $31,415.37
Ethereum up 1.92% to $1,858.92
~ Dave James / Principal Trader and Market Strategist