Market Thoughts

The famed country and western singer, Tammy Wynette died on this day in 1998. She was 55.   She is best known for two tunes – Stand by your Man and D-I-V-O-R-C-E.  Two sides of a similar coin.  Like feeling bullish and bearish, euphoric or depressed, happy or sad, all within the same moment. Stock and financial markets can make you feel that way – especially these days.  Francis Horodelski 

Like relationships, markets can be tricky. On the one hand, we are still bouncing off the 3/20 lows. Another major move higher in futures pushes us well through 2700 in the SPX. On the other hand, institutions are already positioned for another flush lower.

Let’s look at markets first: We opened up Monday +3.5% and doubled from there so a close of +7%. Was it Governor of NY Cuomo being less negative over the weekend or reports of US COVID19 death rate increasing at a decreasing rate? Sentiment matters in the time of CoronaVirus, but more likely it was Central Bank intervention again…


Many traders don’t trust the market to react to IMF+CB+FED action so quickly after intervention let alone trust a huge ~$7bn MOC to buy at close, but that’s the market we’re in. Throw in some passive indexing rebalancing and pension fund buying and clearly SPX $2600 doesn’t offer the resistance quant/CTA funds expected. Add to that, oil holding gains from last week, REITs bouncing off lows and AAPL at $250 with wkly $270 calls getting hugely bid at OPEN, and we had some strong Tells for higher this morning. 

I sided with Quants who made the argument the market would bounce between $2400-2600 as it works through negative gamma:

On Friday, $SPX calls data suggested far more selling than buying. At 2500, selling was 4x buying; at 2600, selling exceeded buying by over 100x. Friday’s $SPX data suggests traders are putting in a put floor around 2400 & writing calls at 2600, therein marking the auction. @nextSignals

My range – as posted this weekend – was higher into $2800 but still holding the belief that we would begin to snake sideways from there. Curiously, institutions are already positioned for another flush lower.


“While short term we might see a relief with some short covering on a relative good weekend in terms of virus numbers. Medium-term we remain pessimistic on the pace of economic decline and negative earnings revision…” Columbo

The market is obviously not more focused on the economic decline if we have the MMT Fed put at play. And if that wasn’t enough: Congressional leaders briefed Wall Street executives about new $1.5 trillion stimulus package that’s in the works and will be ready by end-of-month.

How can the market not be up?!?

Big Picture, I know that bottoms are an event – and we have not only Fed intervention but a solid area of support to bounce off.

The problem I have is this: The Dow chart that Chris Kimble presents below shows a logical area of retest of the break-out, but the retest was not a shallow one. Shallow ones are to be trusted in my world, not violent ones.


Oil is stable heading into the April 9th OPEC++ meeting which is also supportive of the market advance. News related to OPEC+ and Shale companies cutting crude oil production helped crude prices spike from $19.27 (an 18-year low) to close the week out – just shy of $30!

In my live trading room last Monday I spied massive call buying in $USO and recommended long $USO, $XLE, $XOM, $CVX, $OXY. I posted my macro, Intermarket, technical analysis in client posts Tues+Wed. Thurs Crude exploded 35%.

My worry/bet: On expectations that Russia and Saudi Arabia will come to terms and announce a cut, crude goes to ~$35/bbl. Then we drop lower on reports that those talks have once again broken down.

Other potential areas of disappointment this week:

In addition to crude and indices trying to rally off March lows, this week traders and investors will be watching the FOMC minutes, JOLTS, Consumer Sentiment, Jobless claims, and the Consumer Price Index for inflation data insights.

Macro Matters

Has Global Monetary and Fiscal Liquidity Arrived to Save The World?

In the past month as commerce has ground to a halt on fears – real and perceived – from COVID-19, Central Banks around the world have been trying to tackle the devil they know (liquidity concerns) with the devil they don’t (coronavirus).

Long-Term: I am loathe to write this, but I think we need to reflect on the very real risk we are about to plunge into a short-duration depression, not just deep recession. If a lock down is the means for “Suppression” of COVID19, this economic shutdown could extend until a vaccine if secured: 9-18 months. Suppression – in the United States in particular – would lead to many citizens rising up as America has innate political divisiveness on top of massive income equality. Given lack of nation’s social welfare or healthcare, I can imagine the uprisings could turn violent.

And more to the point: what are the alternatives?


COVID19 impact on commercial AND residential mortgage industry, small business solvency, consumer spending, healthcare system, supply chain deglobalization… has yet to be ‘priced in’ because we are still trying to figure out just how big and hairy a problem this is! And there are wide opinions on that as well.

Unemployment people don’t get loans. They use CC which are up big 5.4% YOY + that’s before COVID19!

COVID-19 is a tsunami headed for US shores. Fed has been forced to lower their monetary base in response to the US Dollar liquidity situation which is still a crisis, under the surface in credit markets and on top in equity markets. Throughout it all is the Fed buying up an endless amount of bonds to force yields lower with the hope/plan that by lowering interest rates, it can spur consumers to SPEND and stimulate lending demand.

But… QE is deflationary UNTIL this new money is demanded, and then it’s inflationary. This is simplistic, but I make it so as to better understand that this market backdrop is not so simple to navigate with COVID19 and Fed intervention.

And if you think about it… since the Fed HAS TO BUY BONDS, equities will be under pressure for awhile…

And we lost the largest marginal buyer of stocks = corporations. (Stock buybacks have been cut in half for 2020 on COVID19.)

So here’s my 2020 playbook in a nutshell:

Everyone will buy the same stocks on the way up and they will sell the same stocks on the way down.


And when do we “really bottom”?

At a peak in the bull market, stocks go up while yields fall. Then stocks and yields fall together. We will know when yields have bottomed and stocks can rise again when retail sells stock and buy bonds! They are no where close to doing that yet.

Really Good Reads

The Fed is taking action to pre-empt a deepening crisis. Nathan Tankus has a great up-to-date explainer on what they have implemented and why:

And for an exhaustive and downright forensic look into the CARE act and all it entails, please take some time to read through this passionate prognostication of pandemic proportions.

The CARES Act….The Beginning of the End of Western Democracy….