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)

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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.

Brief Commentary on the Latest Action (video)

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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:

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

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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.

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.

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!

Brief Commentary on Today's Selloff (video)

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Latest Log Entries: Political Miscalculation

5/22/19 Wednesday

Monday saw the market lower on the U.S.’s blacklisting of Huawei, Tuesday saw the market bounce back, and some, on the U.S.’s temporary, and albeit very slight, about face on the blacklisting of Huawei. Wednesday saw the market lower on news that the U.S. is considering denying the sale of U.S. components to a number of Chinese tech companies. We’ll see what Thursday holds, futures are down notably as I type…

Brief Commentary on the Latest Action (video)

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Data Release of the Day: Waning

I mentioned in yesterday's video that we see general conditions waning. One of our proprietary macro index's waning components has been The Chicago Fed National Activity Index.

What The Past Two Weeks Told

Two weeks ago yesterday I posted "A Telling Two Weeks to Come!". In it I stated that the following pending events would help us gauge stock price-action going forward.

Headline of the Day: Could Be a Game Changer (If a Harbinger of Things To Come)

The Dow just staged a 300-pt turn around on the following headline:

Yesterday's Log Entries and This Week's Message: We Should Be Skeptical

Yesterday's log entries pretty much cover my view of immediate-term conditions. Bottom line; we should be skeptical of the staying power of the three-day rally. Beyond the immediate-term, overall general conditions, while reflecting what I'll call trade-war strain, are not at this point rolling over and signaling imminent recession/bear market.

Brief Commentary on The Latest Action (video)

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Chart of the Day: Loud and Clear on the Economics of Tariffs!

Take a look at the market (S&P 500) reaction immediately upon news that the President is delaying (for 6 months) his decision on whether to impose tariffs on European cars:

This Morning's Log Entry; A Most Timely Selloff!

Premarket:

In yesterday’s log entry I suggested that if this week’s data reflects what we’re seeing in our PWA index (a weakening [but not yet recessionary] economic backdrop), it’ll add incentive for the Administration to abandon protectionism as a strategy for combating protectionism.

Well, we’ll soon find out, as U.S. retail sales and industrial production both missed expectations this morning – following week overnight data out of China – and stocks are trading lower in the premarket as a result.

Education on International Trade (really should say "required reading", but it's entirely up to you)

I'm thinking that all of the present hullabaloo around trade makes -- for those interested -- for a wonderful (and extremely important) learning opportunity!

For my part, here are four quick and easy videos I produced before the present administration came to be (so you know, none of my recent carping is the least bit politically-inspired), and a blog post I penned last year.

Quote of the Day: Markets Scratching Their Heads

I agree with the following from Bloomberg macro strategist Cameron Crise's commentary this morning:

This Morning's Log Entry

Trump was clearly rattled by yesterday’s market action; during a speech last evening he suggested that we’ll know if we have a [China trade] deal in 3 to 4 weeks: he said “we’ll see, but I think we’ll get a very good deal”. On that, U.S. equity futures went from red to modestly green; trading notably higher in the cash session this morning. 

Brief Commentary on Today's Selloff (video)

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This Morning's Log Entry: This Week's European Tariff Deadline

5/13/19 Monday

Premarket:

Equity futures are selling off markedly this morning on Trump’s weekend China-trade tweets and China’s stated resolve.

Yesterday's Log Entry: Not Yet Buying This Decline, Or Jumping Ship

5/12/19 Sunday

While I certainly wouldn’t advocate panic at this juncture, I am nonetheless amazed at the sanguinity (if not complacency) I’m witnessing among much of the investment community, amid what is clearly an escalation of trade tensions. I read where one well-known technician deems last week’s late-week bullish action as a signal that we’re near the end of this brief, and modest, selloff, and that new all time highs will soon be at hand. Bespoke Investment Group, whose research I hold in high regard, sees the present as an attractive buying opportunity for equity ETFs, particularly many non-US offerings. I continue to see references to “a very strong and resilient U.S. economy” and how it’ll hold up against the trade war headwind well into the future.

Well, while I like the sound of all of that, I presently do not share the near-term optimism, for the following reasons:

This Week's Message: Surreal! (required reading)

Per many of my latest blog posts, I've been guarded in my assessment of the market's near-term probabilities. And while this week's 2+% declines in the S&P and the Dow, and 3+% decline in the Nasdaq, support my assessment, if you had told me that come Friday's close we'd be looking at a scenario that had tariffs ramped up on Chinese imports, and trade talks concluding with no followup on the calendar (although both sides dubbed this week "constructive" and vowed to continue negotiating), I'd have told you to look for a selloff easily doubling what actually occurred.

This Morning's Log Entry

5/10/19 Friday

Premarket

As I type the Dow future contract is pointing to a 90–pt decline at the open. Given the hike in tariffs overnight, Trump’s tweet this morning that essentially said there’s no rush and that tariffs are good, the potential for him to announce tariffs on European cars next week, the pending details on how China will retaliate, and the odds that the EU will respond aggressively to any hike in U.S. protectionism make the shallow depth of this morning’s futures selloff – not to mention the modest rally occurring in European equities (and the overnight rally in China [although I suspect state-backed buyers stepped in big time) – frankly, surreal!

Complacency Update

I've been noting of late what I view to be a dangerous degree of complacency among market players in certain circles.

Now you'd think that with this week's wake-up call we'd be seeing those snoozers on the bullish (short-term sentiment) side of the boat begin to, well, wake up.

The Only Question Remaining

Given all of the news, commentary and rhetoric around the China trade deal over the past 48 hours, I am now more convinced that my following narrative captures the current state of affairs than I was when I penned it Monday evening. The only question remaining; how much of a hit will the market need to take to permanently pound home the economic reality of tariffs and, thus, inspire a complete change of tactic going forward?

Brief Commentary On The Latest Action (video)

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This Morning's Log Entry

Premarket:

U.S. equity futures are bouncing around a bit this morning; going from notably negative to flat, now moving lower once again.

Bonus Chart of the Day: Our Three Top Weightings Look Relatively Cheap

Yesterday afternoon the Fed released its latest "Financial Stability Report"; its findings suggest that the Fed has some concerns over asset valuations and debt levels (related to businesses) in the U.S. economy. On the plus side the report states that household borrowing remains modest relative to incomes, and sub-prime (credit score) borrowers' debt levels remain "flat". Banks remain in very good shape, as do insurance companies, and hedge fund leverage "appears to have declined over the past six months".

This Afternoon's Log Entry

After suffering a 600-pt decline the Dow rallied back to close down 470 points in today’s session. The late-day buying has carried through a bit into the after-hours session.

Chart of the Day

While it's good sport to profess that the U.S. jobs market suffers at the hands of outsourcing to technology and offshoring to cheaper foreign labor markets, by some apparent miracle the U.S. jobs market remains remarkably robust.

Last Evening's Log Entry (The Sooner the Selloff the Better!)

5/6/19 Monday

EVENING:

Today saw a stellar rebound from a 470-point Dow plunge at the open. The plunge was entirely warranted based on Trump’s Sunday Tweet, the rebound occurred on news that China’s negotiators are nonetheless coming to Washington this week for the next round (was originally billed as the last round) of talks; a scenario that was in question at the market open this morning.

After hours, however, Lighthizer stated that indeed tariffs will be raised this Friday, per the President’s tweet, despite the scheduled talks. Apparently this is in response to China’s reneging on previously agreed-upon provisions in the draft deal. U.S. equity futures immediately tanked on Lighthizer’s announcement; with the Dow dropping by 200+-points, SPX down 20+.

Back to Where We Started

In reviewing my market log entry from Saturday (logged after completing my weekly macro analysis), it occurred to me that after the President's Sunday surprise tweet, the market's strong initial response, and the subsequent rally nearly all the way back on news that China's negotiating team looks to be nevertheless descending upon Washington this week, we're virtually right back to where we left off last Friday.

This Morning's Underwhelming Response to Overwhelmingly Negative News

Overnight, Dow futures traded as much as 600 points lower; as I type the Dow's down merely 170. The depth of last night's lows came on news that China may all-out cancel the trade talks, in response to Trump's Sunday tweet threatening to severely exacerbate the "trade war" (in response to China reneging on previously agreed-to terms). 

High Stakes Poker

Clearly, a record-level stock market, a strong jobs number last Friday and a positive Q1 GDP read has the President feeling like he’s holding the chips, and the winning hand, in the current game of trade poker with China; as he just doubled-down in response to what he apparently views as his opponent's bluff.

Currencies' Reaction to Today's News

I know, more than you need on a quiet Sunday afternoon, but I also know that a fair number of readers look to me to keep them abreast of what I'm seeing/thinking.

Quotes of the Day

Bloomberg's economists pretty much echo my earlier comment regarding what's behind the President's risky move this morning, and that it will "focus the market's attention" on trade; specifically on China's top negotiator's Washington visit this week. 

This I Did Not Expect!

While I've expressed serious concern over the extent to which tariffs will continue to play a roll in U.S./rest-of-the-world trade relations going forward, this I did not expect:

A Telling Two Weeks to Come!

The next two weeks will be telling for equity market price action going forward.

This Week's Message: Concerned (Near-Term) About Complacency (video)

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This Morning's Log Entry

The April jobs number was just released and it was definitely good: 263k new jobs (vs 190k expected), 3.6% unemployment rate (down .2% from March) and 3.2% average hourly earnings growth (same as March). However, average hours worked and the labor force participation both legged just a bit lower.

This Morning's Log Entry

The Fed, per yesterday’s post-meeting commentary, shares our view on the state of general conditions. Powell’s comments regarding the present lack of inflation (transient), despite doing a bit of a number on stock prices (as I hinted it might in yesterday’s entry), were, all things considered, right on the money. That said, this morning’s strong productivity report suggests that there’s possibly room for certain pressures to run (notably) before we see above-Fed target (2%) inflation.

Quick Comment on Today's Action

The Fed left rates unchanged and, in their official statement, along with Powell at the presser, gave an overall upbeat assessment of general conditions. Powell stated that, in the committee’s view, the lower than expected inflation of late is transient and will likely not persist for too long going forward. I entirely agree.

Data of the Day: ISM Survey Speaks To What Most Concerns Me At The Moment

In this morning's log entry I noted that data this week has been "net positive". Well, the exceedingly important ISM (Institute for Supply Management) Manufacturing Survey results were released this morning, and they lower that net (relative to expectations) number just a bit.

This Morning's Log Entry: The Fed Announcement Today Will Be Telling

The week so far has seen no letup in this earnings season’s high percentage of bottom-line beats (relative to lowered expectations). Even top-line numbers, which have been relatively disappointing in terms of % beats, have shown a notable pickup in that category over the past few days.