Thursday, September 19, 2019

Bonus Quotes of The Day: Not The Tone We're Looking For!

Not the tone we're looking for:

Quote of the Day: Life Is Funny!

Couldn't help it!

And, c'mon, just laugh... we could use a little bipartisan humor these days...

This Week's Message: The Market Still Looks Heavy (video)

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Wednesday, September 18, 2019

The Latest Consumer vs Business Data Match Our Index

As we've been reporting of late, the consumer is in pretty good shape. In fact, he/she is doing virtually all of the heavily lifting on behalf of the economy these days.

No Need To "Further' Spike The Punch Bowl...

Didn't do a pre-market video this morning, as any short-term technical signals can easily be blown out when the Fed announces its interest rate decision at 11am (pdt), and when Chairman Powell makes his followup statement and fields questions from the media.

Tuesday, September 17, 2019

No Worries In Today's Data Releases

I wonder if the members of The Federal Open Market Committee (the Fed) were too preoccupied by their discussions over the data today (day one of their two-day policy meeting) to take note of today's data? 

If not -- if they indeed took a peak -- those who favor little or no tweaking (the hawks) had to have looked at their dovish counterparts (those clamoring for a .50% rate cut) and said "see what we mean!"

Today's Log Entry: Call It (the market's odds tomorrow) 50/50

9/17/19 Tuesday

Something very weird is going on with overnight repo rates!

Pre-Market Update and A Quick History Lesson On Fed Rate Cuts and The Stock Market (video)

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Monday, September 16, 2019

Today's Log Entry

9/16/19 Monday

Before the weekend attack on Saudi oil production I had odds at better than 50/50 that the Fed would sound a hawkish tone, while cutting 25 bps; upsetting equity markets, gold (currently trading on prospects for lower-yields, as opposed to Armageddon) and bonds in the process. However, given the palpable geopolitical uncertainty the weekend wrought, my best guess, as I type, is that the fed will tilt dovish, while still cutting 25 bps; which could very well spark a notable rally in stocks.

Pre-Market Update (video)

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Sunday, September 15, 2019

What Might An Uber-Aggressive Fed Deliver?

So the Fed's September policy meeting will happen this Tuesday and Wednesday, with the market's pulse sure to be pounding come 11am (pdt) Wednesday. Yep, even though a quarter-point cut is almost certainly what they'll get, traders in all manner of asset classes will be locked and loaded just in case.

Saturday, September 14, 2019

Bonus Quote of the Day

Donald Broughton, founder and managing partner of Broughton Capital ("a deep-data driven quantimental economic and equity research firm") and the author of the Cass Freight Monthly Report, thoroughly understands economic history:

Quote of the Day: Should Sound Very Familiar

I swear, JP Morgan's Patrik Schowitz must be reading our stuff 😉!

Thursday, September 12, 2019

Can't Blame Them For Trying

Given the color of the latest release of the Eurozone's Industrial Production numbers, we certainly can't fault the ECB for announcing a rate cut and a new round of QE this morning:

Quotes of the Day: This Has Our Attention!

"When prices have been driven by a lot of leveraged buying and the market gets fully long, leveraged, and overpriced, it becomes ripe for a reversal. This reflects a general principle: When things are so good that they can’t get better—yet everyone believes that they will get better—tops of markets are being made."
Dalio, Ray. Big Debt Crises
Leveraged share buybacks (companies borrowing to buy back their own shares) are the first sentence above by definition. And this very much has our attention!

Here's Investopedia on the topic:

"Between 2008 and 2018, companies in the United States spent over $5 trillion buying back their own stock, or over half their profits. As a result, more than 40% of total EPS growth has been from share repurchases.
Leveraged buybacks have made a big comeback in the U.S., where share repurchases have exceeded free cash flow since 2014.

The buyback boom has increased the risk for both bondholders and shareholders. Even investment-grade companies have been willing to sacrifice their credit ratings in order to reduce the number of shares. For example, McDonald’s, whose executives depend on EPS metrics for 80% of their pay, has borrowed so heavily to fund buybacks that their credit rating fell from A to BBB between 2016 and 2018."

Commentary On The Latest Action And General Conditions (video)

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Wednesday, September 11, 2019

Getting Close (to new all time highs)!

Here's the 1-minute chart for the S&P 500 future contract as I type:

The Wisdom of T. Boone Pickens (40-second video clip)

Legendary oil man and trader T. Boone Pickens left the world today, at age 91.

Here's a bit of timeless (and timely!) wisdom from the great capitalist:

Charts of the Day

The first chart below speaks to what we've been preaching herein since our proprietary macro index peaked back in January 2018:

Current Market Sentiment

Here's an internal memo (me to staff) that'll give you the flavor of current (i.e., only for this very moment) market sentiment:
"So last night China exempted a bunch of U.S. products from tariffs... Today Li Keqiang (Chinese Premier) tells U.S. business delegation that "we share wide interests & I believe we have the wisdom to find a solution acceptable to both"... Also this morning, Trump is looking to ease sanctions on Iran... and all we have is a 14-pt move in SPX... and bonds and Gold are still up on the day... That's bearish!   M"


Early-Market Update (video)

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Tuesday, September 10, 2019

Quote of the Day

Bloomberg's Benjamin Dow, in his blog post this morning, speaks to our message in today's video commentary:

Headline of the Day

The Dow went from notably in the red to slightly in the green on this headline this morning:

Pre-Market Update and A Look At the Consumer and Corporate Debt Picture (video)

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Monday, September 9, 2019

Chart of the Day

In Friday's video I offered up my thoughts on the jobs report: Among other (positive and negative) things, I referenced the jump in the number of folks who have taken on more than one job as a sign that there may be some stress building in the lives of consumers.

Here's the chart (grey areas highlight past recessions):



Not a good look...

Last Night's Log Entry: Treading Uncharted Flood Waters

9/8/19 Sunday

Weighing the present bull case against the bear case, while perhaps not (yet) overwhelming, clearly, the bears have the edge.

Nevertheless, and paradoxically, I now place odds that the S&P notches yet another all-time high in the very near future – before a notable correction (if not a full-on bear market) sets in – at better than 50/50.

Pre-Market Update (video)

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Friday, September 6, 2019

This Week's Message: The Good and The Not-So-Good

The good news this week is that our proprietary macro index broke a 5-week string of negative (heightened recession risk) readings, coming in at +4.65.

Pre-Market Update (video)

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Thursday, September 5, 2019

Pre-Market Update And A Look At General Conditions (video)

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Wednesday, September 4, 2019

Finally Breaking Out of This Trading Range?? May Very Well Be!

In my earlier blog post I said:
"While setting a date for September talks would no doubt be good for a couple-hundred+ Dow points, the chasm separating the two sides is wider today than it’s been throughout the entire process."
Well, talks in Washington were just confirmed a few minutes ago, and I got one thing wrong, they'll take place in "early October", as opposed to September. 

Today's Log Entry

9/4/19 Wednesday

Stocks, at least in the pre-market, look to be essentially re-setting the start to September; recouping all of yesterday’s decline.

Pre-Market Update (video)

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Tuesday, September 3, 2019

Not Good News

This morning's release of the all-important (i.e., closely followed by economists and market players) Institute for Supply Management Manufacturing Survey for August came in below 50 (49.1); denoting contraction (or recessionary conditions).

Pre-Market Update (video)

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Monday, September 2, 2019

What Has Investors So Sanguine? And Good Luck If You're Trying To Trade This Thing!

In yesterday's internal log entry, which I shared herein, I made mention of China's better than expected manufacturing purchasing managers survey results. This morning we got the Euro Zone's reports, which, save for France's weren't so good.

Sunday, September 1, 2019

Today's Log Entry: Little Optimism Reflected In Futures Traders' Positioning

Note to readers; here are definitions to terms featured in the notes below:

This Week's Message: Typical This Ain't!

Typically, whenever someone says to me how crazy, volatile, unpredictable, etc., the market is, I'll tell them that on a day-to-day basis it's pretty much always been that way.

Friday, August 30, 2019

Pre-Market Update

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Thursday, August 29, 2019

Trade War Vacation Maybe?

Closely weighing the back and forth commentary while considering coming events, the messaging I gather directly from China's state media to the people, as well as the somewhat rooted political positioning (both sides) to this point, I think macro strategist's Cameron Crise's take this morning is a sound one:

Pre-Market Update (video)

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Chart of the Day: Economists Concerned

Per the latest Wall Street Journal Survey of Economists, it ain't just us.

Wednesday, August 28, 2019

Quotes of the Day: Concerning Trends and Under-The-Surface Stressors

Be it via Fed policy, or fiscal manipulation (per below), when the powers that be attempt to undo the negative consequences of their own actions (without undoing those actions themselves), well, history has proven time and again; that's how debt-fueled asset bubbles are formed.

Pre-Market Update, And A Troubling Trend (video)

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Tuesday, August 27, 2019

Mission Impossible For The Fed

If this, from Bank of America's foreign exchange strategist Athanasios Vamvakidis doesn't sound familiar, well, then, you haven't been reading our blog:

Bonus Quote of the Day

These words from one of history's great speculators are most instructive during times like these:

Quotes of the Day: China -- at this point -- isn't biting...

Like I said in this morning's video, despite the fact that no China to U.S. phone calls took place as claimed over the weekend, the market is treating it as near-term bullish nonetheless, as it signals the President's willingness to deal.

Pre-Market Update, And What You Should Know About "Trade Deficits"

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Monday, August 26, 2019

Quote of the Day: A Challenging Market Environment

Macro strategist Cameron Crise characterizes well this challenging environment:     emphasis mine...

Market Update (video)

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Sunday, August 25, 2019

Mulling Over The Latest....

As I mull over all of the latest this Sunday afternoon -- Friday's speech by Fed Chair Powell, China's retaliation, Trump's retaliation to China's retaliation, highlights from this weekend's G-7 summit, violence in Hong Kong, the results of my weekly macro analysis (the PWA Index a little less red (but still red), the technicals continuing to worsen), how currencies are trading as I type, and so on -- I see little that would inspire me to, at this point, offer up anything that smacks of optimism for stock prices going forward. 

Friday, August 23, 2019

This Week's Message: The Risk/Reward Setup

In our year-end 2017 client letter I expressed my general bullishness, as the macro setup was about as good as I'd seen in my 3-decade+ career. I also expressed, however, that a trade war ("protectionism") would put my bullish thesis to the test.

Pre-Market Update (Video)

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This Morning's Log Entry

This morning China finally announced retaliatory tariffs in response to the latest from the U.S. (the 10% on $300 billion beginning 9/1 and 12/15); of course futures immediately rolled over (but not quite as much [yet] as you might expect).

Thursday, August 22, 2019

Manufacturers Ain't Feeling It!

In case you're wondering what happened to this morning's strong rally; at 6:45 am (pdt), exactly when stocks began selling off, Markit's U.S. Manufacturing Purchasing Managers Flash (advanced [i.e., 85% complete]) Index for August was released.

Pre-Market Update (video)

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Wednesday, August 21, 2019

Quote of the Day

I've reintroduced Brexit into our macro narrative of late because it (the UK leaving the EU with no trade deal come 10/31, that is) indeed carries serious ramifications for global markets.

"It Always Is Debt That Gets You"

Economist Diane Swonk, in just over a minute, pretty well sums up our overall messaging herein of late.

Which is, the consumer's in decent shape, the industrial space isn't, and there's huge risk in the corporate bond market. 

When she talks about "the next traunch up" in corporate debt, she's referring to the BBB risk I've been pounding on the past few weeks:

Pre-Market Update (video)

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Tuesday, August 20, 2019

The Risk/Reward Setup

Being committed to always maintaining a discerning, if not skeptical, eye when it comes to data, trends, our own analyses, etc., we are forever challenging and testing our own theses in our perpetual effort to keep our clients' portfolios positioned within the most favorable risk/reward setup.

Bonus Quote of the Day

I sympathize with the following from Zero Hedge this morning:

Pre-Market Update (video)

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Quote of the Day

I couldn't agree more with economist Peter Bookvar. In fact, if the powers that be would take his advice (but it would have to be relatively soon), I'll become a raging bull on the stock market:

Monday, August 19, 2019

Quote of the Day

Couldn't resist the headline ("Everything Seems Like A Trap Now"), as it speaks to my message in this morning's video commentary

Brief Commentary On The Latest Action (video)

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This Morning's Log Entry

8/19/19 Monday

While the weekend didn’t deliver a rolling back of the yet to be rolled out (pending) tariffs effective 9/1 and 12/15, which I thought could happen, and, thus, send stocks sharply higher this morning, stocks are looking to open sharply higher this morning nonetheless.

Sunday, August 18, 2019

Really Gotta Dig Deeper! And, In Closing, A Personal Note to Clients

President Trump's top economic adviser Larry Kudlow did his job well as he made the rounds this morning.

His message being that strong retail sales and low unemployment prove that there's no recession in sight:

Positioned for Pain

Not that they're always right, but folks who speculate in futures for a living are no doubt bright, and you can bet that they're deep in the weeds of information and general conditions when they place their bets.

Saturday, August 17, 2019

Bear Markets Ain't Easy (Video)

Dear Clients,

Today's video commentary is more encompassing, and therefore longer, than most, but these are unusual times, and we are, therefore, taking unusual measures within your portfolios.

Friday, August 16, 2019

Bonus Quote of the Day: No Bluffing on Brexit? maybe...

Stocks spiked to the highs they're presently holding this morning on this headline:

Quote of the Day: Remember that Brexit volatility? If not, you may shortly...

Switching topics for a minute; remember all that Brexit volatility of 2016? Well, we're within weeks of potentially revisiting it.

This Week's Message: Near-Term Setup and Longer-Term Possibilities (video)

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Thursday, August 15, 2019

The Undying Faith in Central Banks

If you're wondering what's holding up the longest bull market in history amid what in my view is a steadily deteriorating backdrop, as the 1-minute clip below demonstrates, it's an amazing, and undying (until, that is, it's too late) faith in the power of central banks.



Well, while I respect the gentleman's opinion, that's not my take. 

Interest rates are unequivocally not the problem, and lowering them here will not inspire fundamental economic growth. And the notion that if they're going to fall that "you push the cycle out further" is the definition of cherry-picking history. 

Lots Of Damage To Repair Before We Get Bullish Again!

Take a look at the S&P 500 futures contract action from yesterday's close to now (10 minutes before the open):

Wednesday, August 14, 2019

Quote of the Day: China's Now Playing Offense

Clearly, China is now playing offense.

Here's from Hu Xijin, editor and chief of the state-owned Global Times on Twitter this morning:

What Politicians Will Do When Staring Down Defeat

Sorry, can't help it, this one's simply too revealing not to share.

Video Commentary On The Latest Action

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Tuesday, August 13, 2019

This Evening's Log Entry

8/13/19 Tuesday

Just as the market appeared to be fading (this morning) what looked like your classic snap back rally during a corrective phase lower, the White House announced that it was making some exceptions to the "no-exceptions" 10% tariff on the balance of all Chinese imports. Apparently some items will be exempt, and others won’t get hit with the tariff till 12/15.

Big Rally This Morning -- And -- Data of the Day

Wow! The Dow's up 400 points as I type! All on news that the U.S. and China plan to talk by phone over the next two weeks, and that the U.S. is not going to hit 100% of all remaining imports from China with a 10% tariff come September 1. 

If you've harbored any doubt about where the ultimate concern lies, rallies like this should disabuse of you of that thinking.

Sunday, August 11, 2019

Question of the Day

Bloomberg's Garfield Reynolds asks the essential question of the day:

Headline of the Day

Just so you know it's not just us, this just hit the wires:
"Goldman Sachs Cuts Growth Forecast As Trade War Triggers Recession Fears"

The Present Risk/Reward Setup Demands Action

While typically the third year of a first-term presidency is one where we’d expect market-friendly political forces to provide a tailwind for stock prices, in this age of populism and protectionism we’re seeing precisely the opposite. 

Friday, August 9, 2019

This Week's Message: Caution Warranted!

For this week's message, after commenting on the latest from our proprietary macro index, I'm going to simply copy and paste yesterdays internal log entry, which we posted for you here on the blog (worth reading again!), then re-post this morning's video (worth watching again!). These pretty well sum up our current assessment of general conditions.

Video Commentary: The Short-Term Noise, And My Longer-Term Concerns

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Thursday, August 8, 2019

China's Not Aiming To "Fix" The U.S. Stock Market

While some outlets reported that the market's strong rally today occurred on essentially no news, which could imply that it rallied on a lack-of-news, Bloomberg's Eric Weiner shares (below) my view that -- other than a raft of short-covering (which was likely huge given the levels breached) -- it (the catalyst, that is) was all about last night's yuan fixing, which China set at a level strong enough to allay growing concerns that a currency war was brewing.

Bonus Quote of the Day: More Borrowing To Come, But, Alas, No Expansion To Come With It

Bloomberg analyst Benjamin Dow speaks to the phenomenon I outlined in this morning's log entry; i.e., the stimulus-boosted stock market advance (read bubble) that often comes when central bankers realize the world's in deep doodoo. He also hints at the potential systemic risk that's been subtly speaking to me through the numbers; which is the bulging corporate debt level, too much of it at BBB:

Quotes of the Day: Bonds Look Silly Right Here

There's no pearls of wisdom, or perspective, in macro strategist Cameron Crise's morning muse, just an observation that what's happening in the debt market is getting "pretty silly":

Brief Commentary On The Latest Action (video)

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This Morning's Log Entry


8/8/19 Thursday

Should history repeat – assuming we receive confirmation from the PWA Index over the next several weeks that last week’s -2 was the real deal – stocks will stage a multi-week-to-month rally, purely on monetary and (where it can be had) fiscal stimulus, as authorities attempt to avert the coming recession.

Wednesday, August 7, 2019

Looking Inside The Next Recession

Here's an excerpt from my last Sunday entry to our internal market log, where I express my assessment (the good, the bad and the ugly) of current general conditions, and further explain what I eluded to in this morning's video regarding potential stressors that could make the next recession a rather rough one:

Video Commentary: Tweets, China, The Fed, Globalism, The Economic Cycle and The Charts all in one (albeit brief) sitting...

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Tuesday, August 6, 2019

Options Collar Explanation For Clients (video)

The following is specifically for subscribers whose portfolios we manage:

Dear Clients,

Below is a 10-minute video presentation where Nick explains and illustrates the mechanics of the hedging strategy we're proposing and implementing. This will answer many, if not all, of our questions.

Absolutely take the 10 minutes and take this in!

Thanks!
Marty


This Morning's Log Entry

8/6/19 Tuesday

In classic technical fashion -- after yesterday's drubbing -- U.S. equity futures are rebounding in the premarket this morning. European equities are catching a nice bid as well.

Monday, August 5, 2019

Quote of the Day: China Manipulating Its Currency -- in which direction??

Hedge fund manager Kyle Bass, in a CNBC interview, essentially confirmed the point I made in this morning's video commentary:

Video Commentary on Today's Action

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Throwing Kitchen Sinks At One Another (and a post script for every client to read)

Over the weekend Beijing “asked” state-owned companies to cease purchasing U.S. farm products; which is consistent with how their approach to the trade war has evolved in recent weeks. And, to exacerbate matters, the PBOC, which “fixes” each day the range in which they allow the yuan to trade against the dollar, is as I type allowing an exchange rate of north of the psychologically-important 7. This has global currency markets freaking out, and the President tweeting “currency manipulation!”

Saturday, August 3, 2019

This Week's Message: The Futility of the Fed

ATTENTION, ALL CLIENTS SPECIFICALLY (NOT APPLICABLE TO NON-CLIENT BLOG SUBSCRIBERS), IF THE TERM "OPTIONS HEDGE" IS FOREIGN TO YOU, YOU'VE MISSED A RECENT EMAIL FROM ME AND NEED TO CLICK HERE , WATCH THE VIDEO, THEN CONFIRM (VIA EMAIL TO ME OR TO STAFF) THAT WE ARE TO SEND YOU SOME PAPERWORK.

Here's this week's message:

In case you haven't noticed, there's a lot going on in the world today -- and much of it carries implications for financial markets that demand close scrutiny.

Friday, August 2, 2019

Brief Commentary On Today's Action (video)

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Feels Like A Mexican Border Tactic...

Yesterday's China tariff news that roiled the market is starting to feel like a Mexican border tactic (the 5% threat that got Mexican authorities to Washington the next day to "make a deal"), based on this from CNBC this morning:

This Morning's Log Entry: Unambiguously Negative News!

8/2/19 Friday (Update)

Within a minute of posting the below, stock futures turned positive on this news:
"Trump is "open to delaying or halting the 10% tariff on 9/1" if China were to take action between now and then - CNBC"
Now turning red again.

Like I've been saying since this all began, it'll be the market that ultimately puts an end to it. But, given my comments earlier regarding the EU, and the latest (highlighted in previous blogs) regarding Vietnam, India, etc., there's much more market-moving stuff to play out before this ends...

8/2/19 Friday 

As I type, the S&P future contract is pointing to a 0.4% decline at the open. That’s far too sanguine given the potential downside related to Trump’s decision to apply 10% (albeit that’s not the previously-threatened 25%) tariffs on remaining (till now un-tariffed) Chinese imports. We’ll see…

Thursday, August 1, 2019

Brief Commentary on Today's Action (video)

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Quotes of the Day

Like I said in this morning's log entry, for the moment, bad data will be good news for stocks.

This morning's hugely important ISM Manufacturing Index came in at a "disappointing" (assuming you prefer a strong economy) 51.2, yet again declining from the previous month, while missing economists' expectations. And, yes, the Dow went from essentially flat to up 200 points as I type.

This Morning's Log Entry

8/1/19 Thursday

Yesterday saw the market take a dip when Fed Chair Powell didn’t offer up the promise (or enough of one) of future rate cuts traders were hoping for. Equity futures are coming in flat at the open this morning.

Wednesday, July 31, 2019

My take on the Fed and on the moment's selloff...

I'm listening to Fed Chair Powell field what I have to say are all the right questions, which, in a nutshell, are, 
"if you're data dependent, and, on balance, the data has actually been decent since your last meeting, why are you cutting interest rates now and stopping the runoff of your balance sheet a month early?"

This Morning's Log Entry: China, The Fed, Apple, Vietnam

7/31/19 Wednesday

The first tweet I saw early this morning was from Zero Hedge stating that trade talks in China had collapsed after just a day and a half. Within minutes I knew that that wasn’t the case, because I could see in futures trading that the market didn’t collapse. I then jumped over to this morning’s updates from the South China Post which confirmed half of the only legitimate expectations for this round of talks; that China would pick up the purchase of U.S. farm goods, although only under “favorable terms”. Interestingly, there was nothing definitive with regard to the U.S. lightening up on Huawei (the other half of legitimate expectations). Talks are set to resume in September.

Tuesday, July 30, 2019

This Morning's Log Entry

7/30/19 Tuesday

Woke this morning to a string of tweets from Trump hammering China, literally on the first day of the first in-person negotiations to take place since talks broke down in May. Being that he’s going there this morning suggests to me that the preliminary read from the U.S. team is not good, and that Trump sees things potentially going south.

Monday, July 29, 2019

Quotes of the Day

Ironically, Ray Dalio, the subject of my post earlier this evening, popped up in the Bloomberg article I just read (and sympathize with) subtitled "The Dark Side of Rate Cuts." 

Here's a snippet:   emphasis mine...

Has Dalio Lost His Edge?

I find myself thinking a lot lately about something I gleaned from an interview that took place a few years ago with a prominent hedge fund manager (Colm O'shea). He said that as bull markets near their tops, the smart money managers lose assets (clients), while the perpetual bulls collect the last of the spoils (gain assets/clients).

This Morning's Log Entry: Huge week!

7/29/19 Monday

Huge week for markets this week, as 168 members of the S&P 500 will report earnings, as the Fed will reduce its benchmark interest rate for the first time in over a decade, as the economic data calendar from Tuesday-on is loaded, and as U.S. and Chinese trade negotiators meet in Shanghai.

Sunday, July 28, 2019

Quote of the Day

Bloomberg market strategist Mark Cranfield pretty well echoes our present concerns:

The Market's Feeling Heavy (video)

In last week's "weekly message", I mentioned that, per the technicals, the market feels a bit heavy to me at these levels. Here's some of what I was referring to:

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Friday, July 26, 2019

Quotes of the Day -- And -- Why We Do Our Own Work!!

The following speaks to why we do our own work!

Here's White House top economist Larry Kudlow last July:
"We are getting 3 [percent GDP growth] and it may be 4 for a quarter or two."

Here's yours truly last July:

This Week's Message: The Only Game In Town

This morning’s GDP number (+2.1%), while a marked decline from last quarter – and accompanied by a downward revision (to +2.9%) for 2018 – was as good as the market could ask for. 

Thursday, July 25, 2019

Data of the Day

Here's ECB President Mario Draghi this morning on conditions across the Eurozone:
"Generally speaking, you have resilience in the service sector, and construction sector, at the same time this outlook is getting worse and worse; and it's getting worse and worse in manufacturing especially, and it's getting worse and worse in countries where manufacturing is very important. Because of value chains this propagates all over the Euro Zone."
He essentially echoed yesterday's release of the Flash PMI (Purchasing Managers Index) Survey results for July:

Note: 50 is the line separating expansion from contraction. Like he said, the services sector looks okay, manufacturing doesn't.

So how about the U.S.?

Well, while U.S. manufacturing conditions aren't yet recessionary, they're almost there. Services, on the other hand, are still okay, although not quite as strong as the Euro Zone reading:

This is consistent with my current assessment, via categories within our own macro index: Our economic subindex scores a relatively low +9.62 (0 is our expansion/contraction dividing line), with the consumer component scoring a sold +50, while the business component scores a very weak -20.

Now, to bring home how difficult it is to gauge the present state of the world, here's today's July durable goods numbers, with highlights (i.e., they were good!):

Highlights
If manufacturing is the Federal Reserve's central focus, they have less to be worried about. Not even the 2.0 percent headline jump in June, which exceeds Econoday's consensus range, nor the 1.2 percent surge in ex-transportation orders that far exceeds the consensus range, take the spotlight in this report. It's a rare 1.9 percent jump in core capital goods orders that points to new confidence in the business outlook and the release of prior pent-up demand for new production equipment.

New orders for machinery rose 2.4 percent in the month with fabrications up 2.1 percent and primary metals up 0.8 percent. These are all the building blocks to increase future production. Outside of capital goods the good news includes a 3.1 percent order surge for motor vehicles, and to top it off, a 75.5 percent jump for civilian aircraft orders which in prior reports, in part reflecting Boeing 737 troubles, had been depressed. The only real soft spot in June were defense orders where aircraft fell sharply for a second month, down 32.1 percent.

Goods news also comes from readings outside of new orders especially a 0.6 percent June rise in shipments of core capital goods. As the jump in orders for this category points to shipment strength in the third quarter, the strength in June shipments points to strength and perhaps upward revisions for nonresidential fixed investment in tomorrow's second-quarter GDP report.
Total shipments rose 1.4 percent in June, also very strong, with inventories rising a comparatively modest 0.3 percent which points to the need to rebuild inventories in what is yet another positive.
Although, alas (doubling down on my "difficult to gauge" point), the report wasn't all good:
Not positive at all, however, is a third straight decline for unfilled orders, down 0.7 percent in June that includes a 0.8 decline for civilian aircraft. This follows aircraft declines of 1.2 percent and 0.5 percent in the prior two months in what may be a 737 effect.

In a further offset, the headline revision to May was a steep 1 percentage point lower and now stands at minus 2.3 percent, with the revision for core capital goods orders 2 tenths lower (from revised data in the May factory orders report) and now at plus 0.3 percent. Yet shipments of core capital goods in May were revised only 1 tenth lower and are now at a still very solid plus 0.5 percent.

But, still, perhaps things are good enough to have the Fed maybe think twice about piling on a ton of stimulus right about now:

Revisions and the Boeing 737 aside, this report is an echo of the strength of last week's industrial production report where manufacturing posted its strongest performance of the year, and it diminishes the need for Fed rate cuts and will have to be put into broad context or explained away by Jerome Powell at his press conference next week should the Fed indeed lower rates.
And, lastly, the trade deficit widened this month, while both retail and wholesale inventories missed expectations (all components in tomorrow's GDP number). Perhaps the President's been given the heads up that maybe tomorrow's number will come in a bit soft; as he tweeted earlier:
"Fox Poll say best Economy in DECADES!"
Well, the business polls, and, obviously, the Fed, and, not to mention, the PWA Macro Index say different...



Yesterday Evening's Log Entry

7/24/19 Wednesday Evening

While the Dow closed down on poor numbers from Boeing and Caterpillar today, the S&P, the Nasdaq and the Russell 2000 (in particular) rallied strongly.

Wednesday, July 24, 2019

Today's Log Entry (and charts of the day)

7/24/19 Wednesday

Mnuchin and Lighthizer are heading to Beijing next week to promote the appearance that efforts are underway to ultimately end the trade war. The best they can come back with is a commitment from China to begin buying more U.S. ag products, but they’ll (assuming they can) have to give in a bit on the Huawei ban to make that happen.

Listen Closely!

Listen closely to this 43-second video clip featuring Alan Greenspan. This should sound very familiar to clients and blog subscribers:

Conversation with my lovely wife...

My conversation with my wife Judy one morning last week (she's recovering from knee surgery):

Tuesday, July 23, 2019

Video Commentary on the Latest Action

After we produced today's video the White House announced that U.S. officials will travel to China next week for face-to-face trade talks. The market literally doubled the day's advance within seconds of the announcement. 

Traders should probably curb their enthusiasm just a bit, however, as the announcement had been widely expected and the White House added that its eyeing a long-term timeline to strike a deal -- specifically 6+ months; which is responsible guidance out of Washington, as, per our reporting herein, the chasm separating the two sides has widened markedly over the past few months. 

Once playing, click the icon in the lower right corner for full screen. Focus should occur after a few seconds; if not, click the wheel to the left of the YouTube icon to adjust: 

Quote of the Day

The International Monetary Fund (IMF) just once again reduced its global growth forecast, which was already the lowest since the 2008 financial crisis.

Here, from their narrative, is the essence of the problem:

Monday, July 22, 2019

Yesterday's Log Entry: The Market's Faulty Engine

In addition to an analyst's upgrade of U.S. chip makers, the chatter this morning is that the trade war is suddenly taking a positive turn; as (in addition to the weekend news referenced below) the White House is entertaining top U.S. tech sector officials today to discuss the Huawei ban (presumably exploring ways to lift it, at least a bit), and there's rumor that in-person talks will resume in Beijing sometime next week. 

Per my internal log entry yesterday (shared with you below), I'm growing more skeptical by the day:

Friday, July 19, 2019

This Week's Message: The Fed Is Compensating For A Policy-Induced Shock

Pay special attention to the areas I highlighted (with special emphasis on the Fed) and watch the 1-minute video clip at the end (I think the folks at BofA are reading our blog ;)):

Thursday, July 18, 2019

A Perfect Cloud Burst??

While the term “perfect storm” sounds so ominous, it is indeed what comes to mind as I consider this week’s economic data, the virtual promise – from the source – of a July fed rate cut, and deteriorating trade relations between the U.S. and China (and, frankly, the U.S. and the rest of the world).

Tuesday, July 16, 2019

Right on Cue

Today’s menu of headlines was a perfect test of the prevailing two market-moving factors; the Fed and the trade war.

Quote of the Day

Like I've been saying, my read of the mood in China the past few weeks is that it has shifted markedly:

Monday, July 15, 2019

Quote of the Day

Jefferies' global equity strategist Sean Darby echoes the points we've been pounding home herein:

This Morning's Log Entry: Perplexed

The next few weeks will be hugely telling in terms of second half prospects. While it might seem an exaggeration to describe global business conditions as being in disarray, that’s the word that comes to mind; earnings outlooks will go a long ways toward confirming whether I’m justified in my description.

Saturday, July 13, 2019

Quote, and Chart, Of the Day

Per my yesterday blog post "Careful What You Wish For", Macro strategist Cameron Crise and I are on the same page:

This Week's Message: General Conditions Via Our Macro Index (video)

Once playing, click the icon in the lower right corner for full screen. Focus should occur after a few seconds; if not, click the wheel to the left of the YouTube icon to adjust: 

Friday, July 12, 2019

Careful What You Wish For!

Well, as some might say is a good thing, U.S. purchases of Chinese goods plunged 7.8% (year-over-year) in June. However, Chinese purchases of U.S. goods tanked by a huge 31.4%.

Thursday, July 11, 2019

Video Commentary On The Latest Action

Once playing, click the icon in the lower right corner for full screen. Focus should occur after a few seconds; if not, click the wheel to the left of the YouTube icon to adjust: 

Quote (from China) of the Day!

The following tweet from Xu Xijin, editor of China's (state-controlled) Global Times newspaper, is consistent with the hunkering down I've been sensing while reading the Chinese media (each evening) the past few weeks:

Yes, It's All About The Fed, But Just For The Moment

Just to bring home how this moment is all about the Fed, and the prospects for a rate cut, take a look at our one-minute futures charts (left to right, top to bottom) for the Nasdaq 100, the dollar, the VIX (SP500 volatility index), bonds, smallcap stocks and gold on news that inflation rose by 01% (year-on-year [notably higher month-on-month]) higher than expected, and weekly jobless claims came in at 209k, vs 220k expected: 

Wednesday, July 10, 2019

This Morning's Log Entry: Curb Your Enthusiasm!

Right out of the gates in his congressional testimony this morning Fed Chair Jerome Powell offered up precisely what the market wanted; a cautious view of present general conditions that he hints will justify rate cuts to come. Thus, equity futures went from notably red to notably green in an instant.

Tuesday, July 9, 2019

A Not-Pretty Picture

Japanese data (supporting the points we made in our latest weekly message), paints a not-pretty picture of present global business conditions:  emphasis mine...

Yet Another Trade-War-Negative For U.S. Producers

Of course we know the hit that U.S. importers are taking due to the trade war (yes, they write the tariff checks to the treasury, then figure out how to offset [pass on] the cost), however, there's this other, perhaps subtle, but potentially very pernicious disadvantage when it comes to access to one of the world's most attractive labor markets, not to mention the world's largest consumer base.

Monday, July 8, 2019

The Problem That Feeds THE Problem

The President continues to say that if the Fed would cut interest rates the Dow would be at 30,000 and that the economy would rise "like a rocket"!

Sunday, July 7, 2019

This Week's Message: Cherry Pickers' Paradise -- And -- When the White House Once Owned the Fed

Just finished up my weekly deep dive into the market and economic fundamentals and technicals that matter -- on both short and longer-term time frames -- and I'll tell ya, whether you're a bull or a bear, the cherries are presently ripe for the picking, and it's a bumper crop.

Friday, July 5, 2019

The Fed Is Not The Problem!! And Crazy Quote of the Day!

Per Wednesday’s commentary, futures are trading lower this morning on today’s strong jobs report; that’s your cue to start scratching your head.

Wednesday, July 3, 2019

You Should Be Scratching Your Head

Today, true to form for the past few days, the market rallied right into the close (very bullish indicator) and logged yet another all-time high for the major averages!

Tuesday, July 2, 2019

What the Market's Betting On

So, U.S. stocks (SP500) are at all-time highs and fed funds futures are pricing in a 100% chance of a rate cut this month!

The President is touting the best economy in history, and, at the same time, is demonizing the fed for having not yet cut interest rates!

The contradiction embedded in the above sentences is utterly stark 
(all-time high stocks say hugely bullish things about the economy while the need to cut rates says something scary's afoot)!

Manufacturers Echo Our Present Assessment, And Share Our Fundamental Concern

Yesterday's release of the Institute for Supply Management's (ISM) June Manufacturing Index pretty much echoes our present assessment of general conditions overall; expanding, but at a slowing pace.

Monday, July 1, 2019

Quote of the Day

Bespoke Investment Group hit the fundamental (and political) nail firmly on the head in their morning commentary:   emphasis mine...

This Morning's Log Entry

7/1/19 Monday

As expected, futures are rallying hard into the open this morning. Beyond this morning’s spike, and with trade-war-escalation off the table for the moment, the market is set to trade on data releases: Clearly, the trade for the moment is bad-news-is-good-news and vice versa. I.e., weak data releases that support the notion of a Fed cut in July will see stocks higher, strong data, lessening the odds of a cut, will see stock lower -- that is, until we dive into earning’s season, which is right around the corner. At that point the market gets messy, as I suspect we’ll see a good amount of whipsawing as companies express caution going forward (no relief on existing tariffs) against the tone of the data as they’re released.

Saturday, June 29, 2019

This Morning's Log Entry: The Trade Truce, And Its Implications

6/29/19 Saturday

The Trump/Xi summit concluded pretty much as the market anticipated -- a truce -- with one even market-friendlier exception; Trump suggested that U.S. companies can indeed sell to Huawei when national security is not at risk ("more details to follow").

So, no escalation at this point, negotiations to restart right away, 
trade war tariffs already in effect remain, no time frame for the reaching of a deal, and possible Huawei relief.

My expectations for the stock market:

Friday, June 28, 2019

This Week's Message: The Big Meeting's Big Implications

So, it's 9:09 Saturday morning in Osaka Japan, as I type, and there's this big meeting between presidents Trump and Xi happening sometime today. Its implications for financial markets are, well, big!

Thursday, June 27, 2019

A Tough Political Spot For Trump

Stocks are hanging in there this morning on news that even before Trump and Xi get together on Saturday their respective post-meeting statements have already been drafted. Reports have it that the U.S. will suspend the threat of new tariffs and new talks will get immediately underway. 

Wednesday, June 26, 2019

Three-Month Update of My Six-Month Thesis

Three months ago I offered up the highlights of my then six-month thesis. I'll cut and paste it below, and report (in red) on how its panning out so far:

March 14, 2019:

Video Commentary on the Latest Action (and why foreign subsidies are good for U.S. consumers)

Once playing, click the icon in the lower right corner for full screen. Focus should occur after a few seconds; if not, click the wheel to the left of the YouTube icon to adjust: 

Tuesday, June 25, 2019

Things Get Ugly Without a "Grand Deal"!

In this 48-second clip macro strategist Mark Cudmore echoes precisely the discussions we've been having for weeks in client review meetings and the messaging here on the blog. I.e., without a deal removing all new tariffs, things gets very ugly 6 to 12 months out:

Bad News is Bad News, At Least for the Moment

My equity screens got all jumpy right at 7am (pt) this morning, as new home sales, consumer confidence and the Richmond Fed Manufacturing Index were all released at the same time.

Monday, June 24, 2019

Data of the Day

Not that we needed any, but here -- out this morning -- is yet more support for our thesis that the trade war needs to end sooner than later:   emphasis mine...

Is Trump's Approach Strategy or a New Standard? The Answer Is Ultimately Everything for Markets

The G20 meeting happens later this week and virtually all that matters this go-round is the Trump/Xi summit.

Clearly, Trump pushed too hard against a China that early-on seemed desperate to give all but the farm to end the trade war. 

Saturday, June 22, 2019

This Week's Message: There May Be A Game-Changer on the Horizon!

I'm hitting again this week on a theme I've presented herein a number of times in recent years, but, make no mistake, this one's indeed worth hitting again!

While we can use charts and data till the cows come home to form our hypotheses, history (if we bother to look) reminds us that there's often more going on than meets the eye. 

The market was barreling into all-time-high territory in 1995, while the economy was beginning to show some serious cracks.

Watch this classic CNBC video clip:

Thursday, June 20, 2019

Video Commentary on the Latest Action

Once playing, click the icon in the lower right corner for full screen. Focus should occur after a few seconds; if not, click the wheel to the left of the YouTube icon to adjust: 

Wednesday, June 19, 2019

Quick Thoughts on the Fed Meeting

The Fed did about all the market could ask for this morning. No cut in rates (that was too much to ask), but acknowledgement of heightened risks and the willingness to cut rates later if need be.

Two things:

What CFOs Worry About

Duke University’s Fuqua School of Business and CFO magazine conduct the Global Business Outlook by surveying CFOs of companies and subscribers of CFO magazine around the world every March, June, September and December.

This Morning's Log Entry: Is the first rate cut a sell-the-news or buy-the-news event?

A number of credible analysts have been making the case that Fed rate cuts are not necessarily good for stocks, specifically the first cut in a series of cuts. They claim that the data say that investors should buy stocks on the third or fourth cut in a series, but not the first.

Tuesday, June 18, 2019

Headline of the Day

You may have noticed this morning's big rally in stocks! 

We can definitely credit the President with the Lion's share of this one. 

We were already looking at a 150-point rally in the Dow (on Mario Draghi's dovish commentary), but the following tweet explains the additional 250:

There's U.S. Stuff In There!

So yesterday was the first day of the Paris Air Show, and, alas, Boeing booked zero new orders while its European competitor Airbus had a great day. That's great for Europe, bad for us. Right? Well, not so fast!

This Morning's Log Entry: The Bulls Are Aching For a Signal From the Fed

Tomorrow’s Fed decision, and the all-important post-meeting commentary, really shouldn’t be tough to call, although it is!

Monday, June 17, 2019

Be Careful What You Wish For This Week!

The next two weeks are virtually certain to be packed with huge volatility in the stock market!

Friday, June 14, 2019

This Morning's Log Entry

Broadcom’s forecast downgrade, due of course to trade war concerns, has tech selling off a bit this morning. China’s very weak industrial data from last night has the market jittery as well. Not helping matters, ironically, is decent U.S. industrial production and retail sales (both data points released this morning). The latter challenges the notion that the Fed needs to step in and cut interest rates right here.

Thursday, June 13, 2019

This Morning's Log Entry

The major equity averages are rallying at the open this morning: The S&P future contract, while already in the green, popped higher on the higher than expected weekly jobless claims number; i.e., bad news remains good news for now, as it bolsters the case for Fed easing going forward.

Wednesday, June 12, 2019

Must Watch 2-Minute Video Clip

In a Bloomberg interview this morning, hedge fund legend (trust me, this guy more than deserves the label) Paul Tudor Jones pretty much echoes what we've been preaching herein for months (although we're more certain on the recession risk):

Here's a clip:

This Morning's Log Entry

Last week’s rally carried through Monday and into the morning on Tuesday; turning around intraday and closing lower. This morning the Dow and S&P are floating around break even, while the Nasdaq is off .22%.

Tuesday, June 11, 2019

Video Commentary on the Latest Action

In today's video commentary I dig, frankly and directly, into current market and economic conditions.

Once playing, click the icon in the lower right corner for full screen. Focus should occur after a few seconds; if not, click the wheel to the left of the YouTube icon to adjust:

Monday, June 10, 2019

This Morning's Log Entry

The no-tariff news on Mexican goods has the market continuing last week’s rally this morning.

I have to admit that I’m a bit surprised that we’re looking at these levels at this juncture. The underpinnings of the latest rally are anything but fundamentally positive.

Saturday, June 8, 2019

This Week's Message: All We Can Be Certain Of, For the Time Being

Question: Which of the following two hypothetical headlines would make you feel better about the present state of the U.S. stock market?

Friday, June 7, 2019

This Morning's Log Entry: The Problem With "Playing With The Bank's Money" Given Present Conditions

This morning’s disappointing jobs report confirmed two things that I already knew, tariffs are doing a real number on the economy and we’ve entered a bad-news-is-good-news (bad news means the Fed will cut its benchmark interest rate) period for stocks; the Dow, S&P and Nasdaq are all positive in the futures session as I type.

Thursday, June 6, 2019

Brief Commentary on the Latest Action (video)

Once playing, click the icon in the lower right corner for full screen. Focus should occur after a few seconds; if not, click the wheel to the left of the YouTube icon to adjust: 

This Morning's Log Entry

As I type equity futures are moving nicely into the green, after trading lower for most of the evening. From Europe, Trump stated that he could add tariffs to an additional $300 billion of Chinese goods when the time is right, but added that China, and Mexico, really want to make a deal. The hint of deals, as opposed to the threat of more tariffs, is what traders keyed on this morning. 

Wednesday, June 5, 2019

This Morning's Log Entry

Yesterday’s huge rally speaks to traders’ faith that the Fed can cure all economic ills. Problem is, it can’t. But my how it can spark a rally with the merest hint of a rate cut; particularly when the economy is slowing, but not yet in recession mode; which is my current assessment.

Tuesday, June 4, 2019

End of Day Wrap Up (video)

Once playing, click the icon in the lower right corner for full screen. Focus should occur after a few seconds; if not, click the wheel to the left of the YouTube icon to adjust: 

Brief Commentary on the Latest Action (video)

Once playing, click the icon in the lower right corner for full screen. Focus should occur after a few seconds; if not, click the wheel to the left of the YouTube icon to adjust: 

Monday, June 3, 2019

Wall Street Waking Up

In yesterday's log entry (posted herein this morning), I suggested that Wall Street is finally coming around to our way of thinking.

Just got a little more evidence of that from this evening's Asia edition of Bloomberg's Markets Live Blog:

Latest Log Entry

6/2/19 Sunday 

This week’s PWA Index came in at a low expansion reading of 10.59. While consumer data is holding up okay, industrial data is waning, and while the financial stress index on balance is okay (+40), spreads are moving in the wrong direction.

U.S. Manufacturers Feeling the Pain of Protectionism

While not quite as threatening as this morning's manufacturing PMI release, ISM's manufacturing survey for May also came in below expectations.

My highlights below of the report's featured responses sum up the long of the short of it:

No Surprises Yet In This Morning's Data

This morning's release of May's manufacturing purchasing managers survey (performed by Markit) should come as no surprise. The 50.5 reading (below 50 denotes recessionary conditions) screams to the impact tariffs are beginning to have on the U.S. economy.

Quote of the Day

We'll be taking a deeper dive into general conditions here on the blog this week, in the meantime macro strategist Cameron Crise pretty much says the short-term like it is:

Friday, May 31, 2019

This Week's Message: Stuff That Bears Repeating!

Rather than bore you with a weekly message that simply repeats what I've been repeating day in and day out -- this week I'll dazzle you with excerpts from our last six weekly messages. I.e., repeating what I've been repeating week in and week out. 

All kidding aside, this stuff bears repeating!

Putting the Latest In Perspective (video)

Once playing, click the icon in the lower right corner for full screen. Focus should occur after a few seconds; if not, click the wheel to the left of the YouTube icon to adjust: 

Thursday, May 30, 2019

Bonus Unfortunate Quote of the Day

Here's the quote (headline):

Unfortunate Quote of the Day, And A Must-Watch 2-Minute Video

The major averages went from green to red this morning as the following comments were being made: 

"Need To Get The Train Back On The Tracks"

I agree with all but one point Morgan Stanley's CEO makes in the one-minute clip below.

This Morning's Log Entry

5/30/19 Thursday

Month-end rebalancing, a short-term bullish chart pattern and a short-term bullish RSI divergence have odds favoring a bounce in equities right here.

Wednesday, May 29, 2019

Brief Commentary on the Latest Action (video)

Once playing, click the icon in the lower right corner for full screen. Focus should occur after a few seconds; if not, click the wheel to the left of the YouTube icon to adjust: 

Tuesday, May 28, 2019

The Uniqueness of This "Crisis"

I've always found Jim Paulsen to be one of the few analysts (who do interviews) who I find to be clear, thoughtful and objective in his assessments.

In this 1-minute clip from a Bloomberg interview this morning -- while I'm not as near-term sanguine as he seems to be -- he pretty much nails why the market continues to vacillate near all time highs.

Today's Data Releases Support Our Assessment

This morning's two soft (sentiment) data releases speak to our current assessment of general conditions:

Monday, May 27, 2019

'Maybe' A Bounce to Start the Week (video)

Once playing, click the icon in the lower right corner for full screen. Focus should occur after a few seconds; if not, click the wheel to the left of the YouTube icon to adjust: 

Sunday, May 26, 2019

Target Apple??

While the first 35 seconds of the below may touch a nerve (although, it is true that Huawei is more advanced in its 5G technology than is the U.S.), you should appreciate the remainder. Although, depending on your preconceptions (if any), you may need to separate the message from the messenger:

This Week's Message: From Fall Guy to Hero??

Ironically, the President's fall guy (wrongly-accused in my view, btw) for last year's market correction, Fed Chair Jerome Powell, may end up being his savior (albeit temporarily) based on how things are presently trending.

Friday, May 24, 2019

This Morning's Log Entry

5/24/19 Premarket:
Equities futures are rallying this morning on Trump's comment that a trade deal will come quick with China because "thousands of companies are leaving their country". China, on the other hand -- while this morning China's Ambassador to the U.S. did say that they're open to further talks -- isn't sounding quite as optimistic a tone. The Ambassador also said that China will be responding with countermeasures to the U.S.'s blacklisting of Huawei, and the latest message from Xi (and the state media) to the Chinese people is to hunker down and look for substitutes to the U.S.-branded goods they currently enjoy.

Thursday, May 23, 2019

Today's Data Releases: The Good and The Bad

The good:

  • Jobless claims came in this week at 211k. That's really really good! Continues the longest streak in history below 300k!
  • New Home sales for April came in at 673k, which is good, but a bit below expectations. However, the two prior months numbers were revised by a total of 39k higher; that's really good!
The bad:
  • The PMI (Purchasing Managers Index) Composite (includes manufacturing and services) FLASH (preliminary read) for May came in at a barely expansionary 50.9 (50+ denotes expansion, 50- contraction); that's bad!