The Fuse
Equity futures just went heavily negative, down about 1.5% or so as China raised their tariffs on US goods to 84%. The stock market is not taking it well and could be down for a fifth consecutive day on heavy volume.
Interest Rates are on the rise as treasury selling picks up. There has been a big seller in US bonds recently and that has caused yields to back up. Spreads are widening as well, high yield is blowing out and fed futures remain well bid (futures still signaling rate cuts are coming).
Stocks are getting beaten once again as tariff news remains in our midst. Europe fell sharply, down 2.5% on heavy turnover as again France and Germany fell the most. The US dollar fell .6%, crude is getting smashed, down some 7% while gold is ripping higher, so is silver. Copper is hanging in there. German 10 yr bund yields were flat, US 10 yr treasury yields up a whopping 6bps as that big seller continues to swing. Stocks in Asia were mixed, Japan down about 3.9%, Shanghai up 1.3% while Hong Kong was flat.
Earnings this am from Delta and is up slightly but pulled their guidance as growth has stalled in this trade war.
It sure looked as if Tuesday would be an up session, and then the buyers really took control pushing the indices up as much as those prior day losses. Could the end have been near for the markets going down? Not a chance, as the sellers came in and brought the markets down to its knees in riveting fashion. The indices did an about face and fell some 6% intraday but did close off the lows of the session, if that is taken as a positive.
To start the day with better than 9-1 breadth was impressive but to finish it off 3-1 negative was truly bad and quite stunning. If we are to learn something from this market it is to allow things to settle in before jumping. The bulls who were giddy yesterday got their faces ripped off, and believe me they won’t be back. It appeared oscillators were going to make a turn up but that did not happen, they are very oversold here and a large bounce was likely – yesterday, that’s it?- but there is always today. New lows ripped higher, this bear market rages on.
Heavy turnover on this turnaround Tuesday but not of the bullish kind. Originally some good volume as short covering was the conversation of the day, and perhaps a move back towards the declining 20 day moving average would be attempted. But that is much further off than anyone could believe, about 500 points away and this average is dropping sharply each day. It is a shame if the bulls waste the buying volume, but big money is just not interested yet.
The problem with a bear market is the impeccable rallies that often occur to tease the crowd back in. Who wants to miss out on the bottom, right? But this bear market is going to teach everyone a lesson, and that is not to trust any bullish move. More lows likely to be tested, the SPX 500 has my eye at 4655, the 50 month moving average. That is where we may have a sustained bounce, but who knows – fear might be gripping the world by then even tighter.
The Internals
What’s it mean?
It started out delightful for the bulls but then the selling hit and boy did it come in hard. Just nothing to stop the avalanche of sellers to wipeout the days gains and then some. The VOLD started out fine but then was crushed, the ADD also brought to its knees by heavy turnover and a flip of breadth. We see that happening in the TRIN, bottom pane. Lots of sell programs, that has been the order of the day while the ADSPD went from trend up to trend down day, a spectacular move. More of the same bearish action likely today.
The Dynamite
Economic Data:
- Tuesday:NFIB optimism index
- Wednesday:wholesale inventories, Fed meeting minutes
- Thursday:jobless claims, CPI, Chicago Fed Pres speaks
- Friday:PPI, consumer sentiment, NY Fed Pres Williams
Earnings this week:
- Tuesday:TLRY, RPM, WDFC, MAMA, AEHR
- Wednesday:DAL, SMPL, THTX, STZ, PSMT, RELL, TBBB
- Thursday:KMX, BYRN, LOVE, NTIC
- Friday:JPM, BLK, WFC, MS, FAST, BK
Fed Watch:
Stocks to Watch
Volatility – A moonshot of volatility hit last week during the first few days of April. A bit too much? Perhaps, but trying to wade back in is difficult at best, impossible at worst. If the VIX comes down sharply there could be a relief rally.
Tariffs – News of tariffs last week crippled markets here in the US and worldwide. The ramifications are still unknown but most economists believe this is a huge negative for growth. Will there be de-escalation or continued pressure on countries.
Earnings – We’ll have some earnings reports this week, mostly the banks get things underway. With the sharp moves down in this group lately it will take some very soothing words to get investors back in the game.
