Quote of the Day

Yale economist, and renowned global thinker, Stephen Roach echoes our latest messaging herein:

This Morning's Log Entry: What Explains The Market's Resilience in Q3?

9/30/19 Monday

Despite all of the headwinds, although the S&P remains only marginally higher than it was all the way back to January ’18, the market held up remarkable well in Q3. Hmm....

Tech Sector Technicals Not So Good, And My Take On Friday's U.S./China News (video)

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This Week's Message: A Walk Through the Data

We just finished our weekly scoring of the PWA Macro Index and would like to show clients what we're seeing; which in the aggregate illustrates why, for the time being, we remain cautious.

Quote of the Day

With regard to the possibility of a near-term trade deal with China, I posed the following question (among others) in a post yesterday:

"Is the global economic damage already done sufficiently reparable to -- in the near-term -- stave off the next downturn?"

Here's from Daiwa's chief equity strategist last night:

Pre-Market Update (video)

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Bonus Quote of the Day

Sorry to seem so doom and gloomy of late, but we feel the need to keep clients abreast of what's bugging us while the market meanders around all time highs:

Quote (and related concerns) of the Day

Here's from Bloomberg macro strategist Cameron Crise this morning (China-related comments from the President [several times over] this morning -- and the resulting rally in stocks -- suggest he's onto something):

Pre-Market Update And An Important Dive Below The Surface (video)

In this morning's video commentary I make no mention of impeachment risk, of China's last-evening statement that the U.S. is going to have to remove a lot from their proposed trade deal to get it done or of the President's, therefore, conflicting statement this morning that a deal may be near; just the short-term technicals and, more importantly, some of the below-the-surface stuff that has us presently concerned:

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Bonus Quote of the Day: Ironically, America Laid These Foundations!

Also from Alan Greenspan's latest work:

"America laid the foundations of a liberal trading regime by slashing tariffs on dutiable imports from an average of 33 percent in 1944 to 13 percent just six years later. It also laid the foundations of global economic management with the creation of the International Monetary Fund and the World Bank at a conference at a hotel in Bretton Woods, New Hampshire, in July 1944. The General Agreement on Tariffs and Trade (later the World Trade Organization) followed in 1947. It laid the foundations of global political management with the creation of the United Nations in 1944–46.

Quote of the Day: Good Old Fashion Republican Wisdom

While I suspect that all of my readers will nod approvingly as they read the first paragraph below taken from Alan Greenspan's 2018 book Capitalism in America, I also suspect that many these days will struggle with the second; which, make no mistake, explains the U.S.'s preeminence every bit as much as the first:

Chart of the Day

As we've been reporting herein, the consumer remains the heavy-lifter for the U.S. economy, and, thus, we need to be very sensitive to any signals suggesting that maybe he/she's feeling a bit weak in the knees.

PMIs Confirm Our Concerns

As I continue to stress herein, our presently cautious stance stems from our assessment of conditions, both technically (the market/asset class trends) and fundamentally (from a macro economic perspective).

This week's global PMI (Purchasing Managers Index) releases essentially keep us (fundamentally) there.

Quote of the Day: Looming Stress

As you've noticed, we're not entirely constructive on the stock market these days. 

Brief Market Update, And A Look Inside The Tech Sector

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Last Evening's Log Entry

9/22/19 Sunday

Friday saw equities sell off right into the close on news that China’s trade negotiators cut their trip short and headed back to Beijing. It was curious that there was no immediate explanation from the White House designed to calm markets. In fact, earlier in the day a White House trade adviser suggested that if a deal doesn’t come soon that tariffs on Chinese imports could go to 50% or 100%, followed up a bit later by Trump saying that he wasn’t interested in a partial deal.

Headline of the Day.... and context...

Dow's down triple-digits on the following:

"CHINA DELEGATION CANCELS US FARM VISIT TO MONTANA - AGRICULTURE OFFICIALS TO RETURN TO CHINA SOONER THAN EXPECTED"

Yes, that's a near-term concern. The chart we featured earlier, however, is a longer-term, bigger, concern!

Bonus Quote of the Day!!!

I'm with Fed Bank of Boston President Eric Rosengren (he dissented yesterday) on the risks of cutting interest rates in a tight labor market/low interest rate environment.  emphasis mine...

Quote, And Chart, Of the Day

As the Nasdaq 100 futures one-minute chart (below) ticks along on the computer screen to my left this morning, I'm reminded of the following Jesse Livermore quote:

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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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.

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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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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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.

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 😉!

This Week's Message: Transportation Data Confirm Other Recession Indicators

Cass Information Systems' monthly Freight Index Report is widely followed and respected because, simply put:

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

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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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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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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.

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.