Three weeks ago, in the aftermath of the initially disappointing market reaction to the ECB’s lack of further NIRP euphoria which sent stocks (at first) lower, various technicians came out with calls that the bear market rally is over, perhaps most notably Evercore ISI’s Rich Ross who said “My Bullish tactical call is over. While we have repeatedly highlighted 2030 as our upside target, the rapid post ECB reversals in the cross asset technicals dictates that we abandon our tactical view at this time in favor of a far more defensive posture. Our structural Bear Market call with downside to 1,670 remains intact.”
What a difference three weeks and a complete flipflop by the Fed makes. Just hours ago, the very same Rich Ross is now stumped by the market’s action, which in retrospect is perfectly understandable considering Yellen’s latest prerogative appears to once again be to inflate the market bubble in a world where “bad news is once more great news for stocks” with the S&P500 now trading above 2,070, or just 50 points from its all time highs, even as corporate earnings are tumbling and PE multiples, both GAAP and non-GAAP are soaring.
Confused? You’re not alone. Here is Ross trying to make some sense of what is going on.
The S&P 500 is up over 3% since we removed our tactically Bullish call on March 10th and the dollar continues to weaken across the board while volatility and spreads collapse into quarter end. Moreover, the short term technicals continue to improve and build momentum as they enter the strongest month of the year for the Dow (+1.9%). Importantly on Monday we mistakenly cited (The Stock Trader’s Almanac) that April’s Election Year performance drops from 1 (+1.9) to 11 (-.9) when in fact that performance remains strong at +.9% (3).
Clearly we have underestimated the Dollar’s weakness in recent weeks which singlehandedly holds the potential to be a game changer should that weakness persist as the short term technical would suggest. In previous notes we have highlighted the 2077-2086 as an area above which we would be forced to rethink our preexisting views, and while we have little confidence based upon recent price and policy developments that these levels will hold, there is no reason to abandon this tactical framework at this point.
The good news as it pertains to the cautious view is that you are getting paid to be defensive as bond prices continue to surge driving bond proxies higher along with cyclicals and growth. Only banks, biotech and energy to a degree remain noticeably absent from the recent leg of the advance. I would only add that even if one were Bullish at this point, which is perfectly reasonable (not my call, but reasonable), that with almost 94% of stocks above their 50 day ma while volatility, currencies and inflation expectations have surged into levels which coincided with prior inflection points across the risk spectrum, a consolidative pause and pullback remains on the table. 2077-2086 stop.
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While Ross has our condolences, we have repeatedly said that the failure first of fundamentals as well as charts to have any predictive value is no surprise: just yesterday when looking at historical and extrapolated monthly returns, we said that while historical relationships may have been relevant once upon a time, “this was “in the absence of activist central bankers”, which unfortunately will not be the case until the grand reset, and as a result there is absolutely no way of knowing what will happen either in April or for the rest of 2016, now that the Fed has given up pretending it is “data-dependent” and admits it is all about propping up the inflated stock bubble as long as possible.”
Запись Fed’s Flip-flopping Causes Technicians To Lose The Plot впервые появилась crude-oil.top.