Morning Comment: At Some Point, Stocks Will React To Rising Yields



We’re going to be quick and to the point this morning…….The S&P 500 Index reached a new all-time high yesterday, so the stock market rally off the early October lows continues to be a strong one. However, the internals have not been particularly good this week…as the breadth (which was flat yesterday) and volume (which remains low) have not been very compelling. This is not a big deal (at least not yet). The S&P has rallied seven days in a row…and so these weaker “internals” might only be telling us that the market needs to see a very-short-term breather before it moves higher.

However, there is no guarantee that the market will rally further after it takes a breather. The reason we say this is because long-term interest rates continue to rise. The yield on the 10yr note is now within a whisker of 1.7%...and quite close to its 1.75% highs from last spring. We’d also note that it has broken WELL ABOVE its trend-line from 2018 and made a clear “higher-low.” Therefore, if/when it breaks above those spring highs, it will follow that key “higher-low” with an important “higher-high”…which will remove any questions about the fact that the trend for long-term interest rates is to the upside. (First chart below.)

At some point, this has got to create some headwinds for the stock market. It will also likely cause some underperformance for the tech group…just like it did from September 2020 to March of this year…when yields were also rising at a steady pace (just like they are right now).

We do NOT agree at all with those who say that today’s interest rates are still low enough to justify today’s level in the stock market. The S&P 500 is trading at 20.5x 2022 earnings and history tells us ...

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Morning Comment: Healthcare sector poised to outperform.



The stock market just keeps on humming along. Both the S&P has rallied five days in a row…and has successfully moved above its key resistance level (its 50-DMA). In fact, for all practical purposes, the S&P 500 is now testing ...

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Morning Comment: Don't Fight The Fed


Back in the middle of September, the S&P 500 broke below its 50-DMA in a material way for only the second time this year. The first time it happened (in March), it rebounded within two days and then continued to ...

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THE WEEKLY TOP 10



THE WEEKLY TOP 10


Table of Contents:

1) Friday’s employment report should not keep the Fed from tapering.

2) 3 major economic powers are getting less stimulative. That’s all you need to know.

3) Inflation fears will remain even if ...

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Morning Comment: Otter was right!



Today could be one of those days where all investors wait around to see what happens next. Sometimes, there is a very important data point that everybody wants to see; or there is a speech that everybody wants to hear. ...

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Morning Comment:

Tomorrow night, the Boston Red Sox and the NY Yankees will play in the wild card playoff game at Fenway Park in Boston. This is essentially a “play-in” game for the American League playoffs. Just over 40 years ago, we ...

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Morning Comment: Three Key Changes In Trend That Concern Us Greatly



It was another rough day in the marketplace yesterday…and seems to be pointing to lower stock prices as we move into October (no matter what happens today). Probably the worst development from yesterday was that the Yankees won and the ...

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Morning Comment: We're following the same script as this time last year.


We had a very mixed day in the stock market. The S&P 500 and Nasdaq declined, while the DJIA and the Russell 2000 rallied. We had a similar divergence among the groups, with the energy and financial sectors rallying strongly, ...

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THE WEEKLY TOP 10

I am told that there was a problem with posting my “Weekly Top 10” last evening. Therefore, I thought I’d re-send it myself this morning. My apologies if this is a dupe. (BTW, this was written before the news that ...

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Morning Comment: The spill-over of a key de-risking policy.


Much like the coronavirus in January and February of 2020, the situation facing Evergrande has been staring investors in the face for a while now…and yet they have ignored the growing negative situation (mostly due to the fact that the ...

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THE WEEKLY TOP 10

I’ll be away next weekend, so I will send-out an abbreviated edition of “The Weekly Top 10” on Thursday evening. Thank you very much.


THE WEEKLY TOP 10


Table of Contents:

1) When inflation is induced by a lack of ...

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Morning Comment: Liquidity stresses in China growing


Last year, at about this time, we turned bullish on the bank stocks. We said that after 2.5 years of underperformance, the group would finally start to outperform the market. There were not very many people who agreed with us. ...

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