Wednesday, March 30, 2022

Morning Note: Not 'Ultimately' a Bullish Setup Right Here

Last evening's entry to our internal market log:

Interesting action today. Commodities continued their notable slide at the open, while stocks (non-US especially) rallied hard. This was clearly in anticipation of constructive peace talks.

While the talks did not result in a ceasefire, some level of de-escalation was assured; although that’s already been occurring in specific areas of late, and skepticism is warranted with regard to the motivation.

Commodities crept back up during the session: Among our core positions, gold finished 4 bps in the green, silver lost only 9 bps, energy stocks clawed back all but 26 bps of their earlier losses. Metals miners and base metals futures however still closed down 1.42% and 1.80% respectively.

Bonds rallied.

So, were it not for the continued malaise in base metals, I’d say the action in commodities reflects anticipation of no end in near-term sight for Russia/Ukraine. The rebound in gold, and the bullish action in bonds seem to support that notion. Stocks, however, while (US) still not positive on the year, rallied as if odds favor a near-term end to the war.

Speaking of stocks, the action entirely comports with my view that myopia is acute right here, and, therefore, given the possibility of looming 
peace , no one wants to miss out on what they expect to be a sharp rally on the news. That said, the more the market continues to move higher on the prospects for peace, the more likely peace ultimately becomes a sell the news event. As, in the immediate aftermath, the market will have to deal with major headwinds emanating from a Fed that appears hellbent on reining in inflation.

Not, ultimately, a bullish setup right here…

Asian equities were positive overnight, with all but 3 of the markets we track closing higher.

Europe's struggling this morning, with 13 of the 19 bourses we follow in the red as I type.

US stocks are mixed (mostly lower) to start the session: Dow up 29 points (0.08%), SP500 down 0.24%, SP500 Equal Weight down 0.18%, Nasdaq 100 down 0.49%%, Nasdaq Comp down 0.52%, Russell 2000 down 0.38%.

The VIX sits at 18.93, up 0.16%.

Oil futures are up 3.58%, gold's up 0.71%, silver's up 0.46%, copper futures are up 0.22% and the ag complex (DBA) is up 1.11%.

The 10-year treasury is up (yield down) and the dollar is down 0.59%.

Among our 37 core positions (excluding cash and short-term bond ETF), 22 -- led by MP (rare earth miner), base metals miners, uranium miners, wind stocks and base metals futures -- are in the green so far this morning. The losers are being led lower by carbon credits, Eurozone equities, semiconductor stocks, banks and tech stocks.

From William Struss's and Neil Howe's enlightening and provocative 1997 book The Fourth Turning (I highly recommend):
“There is a mysterious cycle in human events,” President Franklin Roosevelt observed in the depths of the Great Depression. “To some generations much is given. Of other generations much is expected. This generation has a rendezvous with destiny.”
The cycle remains mysterious, but need not come as a total surprise. Though the scenario and outcome are uncertain, the schedule is set: The next Fourth Turning—America's next rendezvous with destiny—will begin in roughly ten years and end in roughly thirty. How can we offer this prophecy with such confidence? Because it's all happened before. Many times."


Have a great day!

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