The 10-year Treasury yield stalled at just over 5% and was then thrown back by a one-two punch of a new Treasury schedule for refinancing and an unemployment number that, at last, wasn’t red hot. These two points blunted anything that Federal Reserve Chairman Jerome Powell had to say and that was all it took to have the best week in the stock market of the year. Can it continue? Let’s start with sentiment. If you go back to the week before last, you must remember that we had seen a host of people on television, in the papers, and on X, formerly known as Twitter, who were incredibly negative. The usual billionaires were rounded up, and they had their usual sirens about the level of the sky versus the ground. They put in their Chicken Little clothes because, well, why not? Why should they say things are good? What’s the percentage? Why should they mention stocks they like? They, long ago, abandoned stocks because they run too much money. I don’t even know if they do the homework anymore. Their advice is nothing short of abysmal, and it’s never even remotely positive. At this point, all I ask is for them to consider being constructive, but that’s beyond their ken. Their lack of value is only exceeded by the promotion they receive. Quizzically, President Joe Biden doesn’t seem to care. Occasionally, he dispatched Commerce Secretary Gina Raimondo – or she dispatches herself – to talk about what her agency is doing to promote business. Raimondo has been pretty effective in telling the administration’s story. But Biden president sure hasn’t. He’s the union president, which contributes to investor ennui given how unions have produced minus signs in the stock market wherever they prey. The myriad negative forces that were driving up bond yields were pretty counterintuitive. The Israeli-Gaza war and the quiet threats along the northern border did NOT produce a flight to safety – meaning bond buying, which pushes up prices and yields down since they move inversely to one other. Or perhaps there was too much supply. We can’t seem to learn it, but more on that in a moment. We saw no generic national numbers that week before the euphoric run. Nothing that would drive up yields. But yields looked to break out the wrong way for the stock market for certain. Uniquely, we now realize the market was at a crossroads. We didn’t think it was, but it was. We didn’t realize that yields could be peaking: 6% was beckoning on the long end of the bond market yield curve. But two things were in favor of the bulls. One? The market reached that same level of oversold that has produced a bounce every time this year. Incredible how accurate the S & P Short Range Oscillator is. (I talk a lot about it, so we got you a deal on it if you want it.) That minus-six level is just a nasty level for shorts, who once again, had their way. The other thing? We forget that when a BAD October ends you tend to see an end to selling. Mutual funds have a funky fiscal year, and they take their losses at the end of October so investors have a chance to adjust their tax planning. The losses were obvious but, somehow, I guess we didn’t notice them. So, put it all together: we were as negative as we had been all year, institutional stock selling was exhausted, we had a fulcrum set of events that were frightful – the Fed meeting, the Treasury issuance schedule, Club name Apple (AAPL) earnings, and the Friday unemployment number. If anyone had told me that on Friday, Oct. 27, the bulls would go, five or five last week in the S & P 500 , it would have been as inconceivable as the Phillies losing the Pennant race. Just impossible. But it happened. This past Monday and Tuesday both felt like relief rallies. There wasn’t any selling to speak of after the morning on Tuesday. That was the signal you had more than a one-hit wonder, something that we all figured would be the case given that bonds were flirting with an interest rate breakout again. Last Wednesday, the Fed meeting turned out to be benign. A rate hiking pause spoke louder than the chairman himself who reiterated he is more worried about inflation than an economic slowdown. I still can’t figure out why that was ignored. I guess if he were really worried about inflation he just would have tightened. He didn’t. The questioning elucidated nothing of any meaning. That was very positive in itself. I keep talking about how the biggest thing in the bulls’ favor was the shocking Treasury schedule. Until Wednesday, I thought Treasury was clueless. That it was part of the problem issuing long bonds. I think many people believed that hedge fund pioneer Stanley Druckenmiller was the only person sounding the alarm about not using the long end for refinancing. By the way, this caused much soul-searching by yours truly. I had become a broken record about this for a decade and had incurred nothing but derision. I guess billionaires are the only ones with heft. Meaningless self-remonstration for me. Three for three Wednesday and the bulls seemingly couldn’t be stopped. I think the bears, who, remember, had been winning on stock after stock except Club name Amazon (AMZN) – and they even had been winning initially – seemed almost complacent. Why not? The biggest stock in the market is Apple – and if you wanted a stock to be a bulwark of the bear case, it was the company that analysts only consider a pathetic no-growth handset company that has no game in China, the only country that matters. The bears had a host of analysts on their side: this moment has not been kind to the world’s largest company and most analysts who defend it do so in a half-hearted fashion. They have cut their teeth on the hardware side, and they don’t recognize a service stream even when it is bigger than the Mac, the iPad and wearables together, as it will be this quarter. So, last Thursday’s session was, again, one where we were still oversold and there was a complacent negativity by those who still liked stocks. It seemed inconceivable that Apple could actually matter anyway but negatively. Then the number came out . It was immediately interpreted as negative, top and bottom, and every line item. I get to talk to Apple CEO Tim Cook and CFO Luca Maestri beforehand WITHOUT the guidance and I was pleasantly surprised that so many countries were joining the ranks of Apple service users. I liked so much about it and was cognizant that so little of the 15 numbers were included and currency was its usual nightmare. We weren’t high-fiving each other just positive that Apple didn’t lose share in China handsets to Huawei and that China was still a very strong market. We don’t talk much about Mac or iPad, the former because a new iteration had just come out, the latter for no particular reason. But I had no illusions. I figured that the first move would be to $170, and the next? The chart indicated a death cross total breakdown or whatever. Given that so many exchange-traded funds (ETFs) key off of Apple, it did seem like at last the bears would have their day. Then something happened: no one downgraded it. No one. There was no coup de grace. Without it, there were no fresh sellers. Pattern? No sellers. Because bond yields were tame? Because there was no one left to sell? Because things just weren’t that bad? All I can tell you is that the Apple selling last Friday morning was relentless from 4 a.m. ET on. But at each point, buyers surfaced. It was as if we had a tug of war that the anti-Apple folks kept winning but somehow kept the pro-folks in. Without the bonds, which were furiously rallying in price and driving yields down off the benign employment number, without the usual program selling in the S & P from the yields, there was no additional supply to help Apple be beaten down. By midday, there seemed no reason to sell. Which brings us to Monday. We have a nothing week, literally nothing. When I did my gameplan for Friday I was astonished how Apple just point blank ended the important part of earnings season. This week’s tougher for those inclined to buy . We are out of nowhere really overbought, according to the Oscillator. But that’s not necessarily bad given how little there is to knock things down or to shoot gains. Six of the seven are done. We have Club name Nvidia (NVDA) but it’s a holiday moment so it won’t matter as much even if it is weaker. I think we will now get a bit of a sort-out. There is no compelling reason to buy other than fear of missing a second week of positive action. But there seems even less of a reason to sell unless we get something that can stir more inflation fears. I just see weaker data ahead. Oh sure, we should catch some tech downgrades as the group has run so much. We should expect the broadening out to end if bond yields tick back up. But if they don’t, I see buyers wanting to buy and sellers not wanting to sell. We have not been in a halcyon moment in ages. And, no one ever wants to call anything halcyon given the X/YouTube age of never playing the good calls and always playing the bad calls. If you are me, you are astonished that the world’s richest man (or is he still?) – follows the Inverse Cramer ETF even though I have been and remain pro the stock of Tesla (TSLA) for more than one hundred points. Is Elon Musk rooting against himself in order to make the point that I am so wrong by picking his stock and putting it into the Magnificent Seven. I am honored. So, the lights on the homes are going up. The holiday sales are upon us. The negativists are wondering what happened and is a 6% bond yield now a bear’s dream instead of a bull’s nightmare? It sure seems that way. So, let them run and let them rip even as the market is overbought. For us, I want to clear out some of the ill-advised choices. Even Charitable Trusts take losses to offset gains so the money stays in the Trust . (We use my Charitable Trust as the portfolio of the CNBC Investing Club.) Hence, the Foot Locker (FL) sale even as I like what CEO Mary Dillon is trying to do. Can you actually “like” the market? I think you need to see one of these traders —there are so many of them — or strategists who haven’t liked the market eat some darned crow. But that’s not in their diet. So, they will have to take some GLP-1s and hope for the best. But hope should not be part of the equation, not just for the bulls but the bears. Maybe they should have known that. Late is not better than never in this game. They should have reasoned that, too. They didn’t. Good for an all-long Trust. Good for you, the members of the Club. (See here for a full list of the stocks in Jim Cramer’s Charitable Trust.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. 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Jim Cramer at the NYSE, June 30, 2022.
Virginia Sherwood | CNBC
The 10-year Treasury yield stalled at just over 5% and was then thrown back by a one-two punch of a new Treasury schedule for refinancing and an unemployment number that, at last, wasn’t red hot. These two points blunted anything that Federal Reserve Chairman Jerome Powell had to say and that was all it took to have the best week in the stock market of the year. Can it continue?
Let’s start with sentiment.
If you go back to the week before last, you must remember that we had seen a host of people on television, in the papers, and on X, formerly known as Twitter, who were incredibly negative.
