Morning Note: Headwinds

The "counter-trend" rally in stocks is being put to the test to start the week. Per our latest video snapshots, there's a bit of upside room left between here and our target (before it gives up the ghost, as, in our view, probabilities suggest), however, that last mile or two could be a challenge.

Equity Market Conditions Less Bad -- And -- Thoughts on China

The latest two entries to our internal market log are worth sharing:

05/28/2022 PWA EQUITY MARKET CONDITIONS (EMCI) INDEX: -8.33
(from -58.33 on 4/29/2022)

SP500 fell markedly during the first 3 weeks of May. Bottoming on 5/20 (a number of our EMCI inputs were turning up roughly a week prior), then bounced hugely from there, catching back up to essentially the flatline thru 5/27 (the bulk of the move occurring 5/25-5/27).

Economic Update (video)

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Attention Non-Client subscribers: Nothing in this video should be construed as investment advice. The examples expressed relate to portfolio management we perform on behalf of our clients, and, again, under no circumstances are they to be considered recommendations to the viewer.

Stock Market Snapshot (video)

One thing I forgot to mention in this morning's update (as mentioned in Wednesday's morning note) is that there's likely a serious rotation occurring within funds whose mandates keep them at a targeted stock/bond mix. In that stocks over the past month have underperformed bonds notably, there's some month-end rebalancing (overweight bond selling, underweight stock buying) that is likely helping this rally along -- but only for the moment... 

Morning Note: Inflation's Cooling (ever so slightly), But It'll Remain a Thing...

So, personal income for April, released this morning, rose at a slower pace vs March, and slower than economists' expected. Personal spending's rate of change slowed month-on-month a bit as well, however, it came in .2% higher than expectations. But of course the price index is what everyone's keying on this morning!

Morning Note: Fed Can't Have it Both Ways -- And -- So Far So Good (our 'short-term' assessment)

A smart, deep-thinking subscriber (and client) inspired some content for this morning's note.

Here's a snippet from my response to his thoughtful contribution to yesterday's comment section:

Morning Note: No Surprises Right Here

The equity market has been buffeted of late by headwinds that, given the present state of inflation and overall slowing general conditions, should come as no surprise to anybody. That is, companies are having to state it like it is, with regard to their go forward prospects.

Dick's Sporting Goods this morning being the latest.

Stock Market Snapshot (video)

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Attention Non-Client subscribers: Nothing in this video should be construed as investment advice. The examples expressed relate to portfolio management we perform on behalf of our clients, and, again, under no circumstances are they to be considered recommendations to the viewer.

Morning Note: Consumers Plan to Spend Less, but Fly More -- And -- Weakening Housing Market

Well, judging by overnight and pre-market futures action, it's looking like the bounce off of technical support (green circle on the 60-minute chart below) that began last Friday may be short lived.

Morning Note: The Good News

As I've expressed in recent video commentaries, a stock market bounce right here makes some technical sense. However, as I've also pointed out, while we're open to all possibilities, the likelihood that we've seen the ultimately worst remains somewhat low. I.e., the conditions that often surround a durable bottom in stocks have yet to come together...

Stock Market Snapshot (video)

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Attention Non-Client subscribers: Nothing in this video should be construed as investment advice. The examples expressed relate to portfolio management we perform on behalf of our clients, and, again, under no circumstances are they to be considered recommendations to the viewer.

Morning Note and Weekly Economic Snapshot

China's central bank stepped in last night with a cut to its 5-year prime loan rate that was larger than the market expected -- that jibes with our view that all policy stops will be pulled out during the remainder of the year as authorities attempt to stimulate the economy out of what has become quite the mess. That would bode well for our foreign equity and commodity exposures going forward.

Morning Note: History Rhymes

Yesterday's rout, one could say, reflected Walmart's and Target's reportedly ugly state of affairs; shrinking margins, bulging inventories, and so on. But, then again, per our assessment of present conditions, and our video snapshots, odds firmly favor more downside in equities before this year's price action plays itself out.

Stock Market Snapshot (video)

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Attention Non-Client subscribers: Nothing in this video should be construed as investment advice. The examples expressed relate to portfolio management we perform on behalf of our clients, and, again, under no circumstances are they to be considered recommendations to the viewer.

Morning Note: The Fed's Fine Fix

This from Bespoke Investment Group's note this morning says lots about the present setup:

Emphasis mine...

"Yesterday, WMT had its largest one-day decline since the 1987 crash and now TGT is on pace to do the same. The experiences of both companies further reinforce the point that we are operating in one of the most complicated macro environments that any company or investor has had to deal with. Few companies are so entwined into so many aspects of the US economy as WMT and TGT, and their logistics and supply chain operations rival or exceed those of most other companies. If they're having these types of issues keeping up with the rapidly changing environment, who isn't?"

Morning Note: Just Assessing Probabilities

This morning's rally in stocks should come as no surprise if you've been with me on the recent videos. Short-term technical patterns have been pointing to the potential for a strong oversold rally.

Here's yesterday's entry to our internal market log:

Morning Note: "A Key Risk?"

"The bottom line? Supply chains and inflation remain in flux, but there are signs that these issues could start to work themselves out in the second half. If they do, a less hawkish FOMC could be the market surprise for the second half. A key risk, though? Economic activity remains strong, but there are legitimate signals that demand has peaked."

Let that -- from Bespoke Investment Group's weekend note -- sink in "A key risk, though? Economic activity remains strong"... 

Our Fear/Greed Indicator Is Reading Green...

In Monday's morning note I made the case for a potential "oversold bounce" in the stock market this week. I mentioned the possibility again in last evening's video commentary. 

Morning Note -- And -- Economic Update (video)

Per last evening's look at the short-term S&P 500 setup (video featured below), a relief rally is certainly in the cards right here. As I type, equity market futures are confirming that notion. Whether or not it sticks, well... of course that remains to be seen.

Market Snapshot/Reality Check (video)

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Attention Non-Client subscribers: Nothing in this video should be construed as investment advice. The examples expressed relate to portfolio management we perform on behalf of our clients, and, again, under no circumstances are they to be considered recommendations to the viewer.

Morning Note: Be Patient, But Only When.........

So, while yesterday's release of the May CPI number came in hotter than the equity market (actors in the aggregate) had hoped, and than economists had forecast, this morning's PPI (Producer Price Index), came in on the nose of consensus expectations (up 0.5% month-over-month versus 1.4% the previous month). In terms of market reaction, zilch! S&P 500 futures were down 0.85% coming into the number, they're down 0.76% as I type (2 minutes ahead of the open).

Morning Note: Timidity...

While listening to Bloomberg live this morning to catch the March CPI number, and the market's response, an interview with former Federal Reserve Board member Bill Dudley captured my attention.

Morning Note: "Ironically"

Yesterday's (and overnight in the futures market) rally in treasuries (yields lower) comports with the notion we explored yesterday; that softer than expected inflation data (CPI due tomorrow) could inspire an oversold bounce this week (but don't hold your breath).

Premarket action (a rally) in equities suggests traders may be sniffing that potential out. 

Market Snapshot/Reality Check (video)

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Attention Non-Client subscribers: Nothing in this video should be construed as investment advice. The examples expressed relate to portfolio management we perform on behalf of our clients, and, again, under no circumstances are they to be considered recommendations to the viewer.

Morning Note: Maybe An Oversold Bounce in the Offing, But Still An Otherwise Messy Setup...

An oversold bounce makes some sense this week, but nothing here looks like a bottom's forming...

Here's from Saturday's entry to our internal market log:

Quote of the Day -- And -- Asleep at the Wheel?

Way back in 1984, on the day after my 21st birthday, I had what it took to get hired at the firm now known as The Principal Financial Group. That is, I had a pulse...

Economic Update and Stock Market Snapshot (video)

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Attention Non-Client subscribers: Nothing in this video should be construed as investment advice. The examples expressed relate to portfolio management we perform on behalf of our clients, and, again, under no circumstances are they to be considered recommendations to the viewer.

Morning Note: No Bad News on Jobs, So No Good News for Stocks

US stock futures popped a tad higher at 5:30am pt when the jobs number was released. While the number -- the establishment survey number -- came in at 428k, which was 58k higher than expected, the month-on-month hourly earnings miss (.3% vs .5% expected), the household survey number showing a loss of 353k jobs and revisions (establishment survey) totaling -39k for the prior 2 months, had, I suspect, the market thinking maybe there's less inflationary pressure percolating in the jobs setup.

Pondering...

Just kinda sitting back this morning and pondering the market mood...

Thinking about clients; thinking about what they're thinking about the market...

Morning Note: Not A Good Look....

Suffice to say that while yesterday's rally was very impressive, the underlying picture -- technically speaking -- remains concerning. 

Charts of the Day: Commodities Traders Need Far More Convincing...

Just a quick note on today's J. Powell press conference.

While stocks rallied on Powell poopooing a .75% hike at a future meeting and on the Fed delivering half the expected monthly balance sheet reduction (for the moment), as for the goal of taming the hottest inflation in 4 decades... umm, well, have a look at today's moves in:

Market Snapshot (video)

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Attention Non-Client subscribers: Nothing in this video should be construed as investment advice. The examples expressed relate to portfolio management we perform on behalf of our clients, and, again, under no circumstances are they to be considered recommendations to the viewer.

Morning Note: A Dose of Reality -- And -- Zero Wiggle Room

So, you bet, a 12.4% year-to-date decline in the S&P 500 and a 19.5% year-to-date hit to the Nasdaq is nothing so sneeze at. I mean, I'm sure folks are feeling it, particularly those who thought they were playing it "safe" with the old tried and true 60 (stocks)/40 (bonds) mix. That last one (using Blackrock's 60/40 ETF as our proxy) is down 10.5% on the year so far.

Morning Note: So Now You Know

So, when you think about the big event of the week -- the Federal Reserve May Policy Meeting -- going on today and tomorrow, what you're thinking about is the institution's impact on financial conditions. Are their policies fostering loose and easy conditions (plenty of liquidity and low interest rates), or tight conditions (low, or less, liquidity and rising interest rates)?

Quote of the Day: Growth Down, Inflation Up

The fiscal response to Covid shattered all historic norms and established precedent, and, therefore, foments expectations of reactive relief measures (read support checks, etc.) whenever the populace experiences heightened pain.

Morning Note: Commodities Continue to Correct, But the Long-Term Setup Remains Extremely Bullish!

Global equity and commodity markets are starting off what will be a tense week (at least until Wednesday when the Fed wraps up its May policy meeting) on the back foot. China's PMI's (Purchasing Managers Indices) weak readings are exacerbating global demand fears.

Coincidentally, I, among other things, once again touched on China in our internal market log over the weekend. 

Here are a couple snippets: