I try the best I can to make sense of the ups and down of the S&P futures, but to tell the truth, I really do not know what to say. It’s up, it’s down, it’s all around, and in between are all the algorithmic computers that make money while the public loses. No matter how you look at it, it’s just a big electronic arcade. If it’s not the DAX or the selloff in the dollar, it’s Janet Yellen saying that stock market valuations were “quite high.” But she also threw in that stocks were not as “pricey” compared to bonds. All of these were part of this week’s selloff.
Stocks and bonds have always been connected but they are even more so today. The Federal Reserve knows that bonds have remained expensive for the same reason the stock market is cheap and it all goes back to one thing: the fear factor. When the public gets scared, they start selling, and with the Fed threatening to raise rates later in the year, some are scared. Others have just grown weary about the stock market in 2015. Kenneth Rogoff of Harvard University said, “bonds do more than protect your portfolio against garden-variety recessions and bear markets. They also act as insurance policy against black swan-type disasters.” What kind of disaster? It could be anything from a major terrorist attack, a war breaking out in Europe or a major European default could potentially set things into motion. I know we have seen the S&P sell off many times over the last several years but as I have said many times, this year feels different. It’s way more risk off, than risk on.
Markets In Motion
If it’s not Greece it’s the pull back in yields sending the euro below a 10-week high vs. the dollar. If it’s not the DAX pulling the S&P lower it’s algos, news-driven sell programs. A bond market crash, oil rallies to 62.50 over two weeks and drops down to 58.50 in one day. Gold can’t hold above $1,200.00 and the European bourses are trading at the lowest levels in two month, the euro is ripping high and Yellen is warning us about equity evaluations. Today it’s the April jobs report and the continued threat by the Federal Reserve to increase borrowing costs this year. It all has made for a very choppy four months. Clearly the markets are in motion but where are they headed? To tell the truth I am sticking to the idea that the S&P is not going up or down sharply anytime soon and that all the latest selloff did was to add more buy stops above the market. Hate to say it folks but the S&P is like water in the bathtub, push the water one way, then push it the other way.
In Asia 8 out of 11 markets closed higher (Shanghai Comp. +2.28%) and in Europe 12 out of 12 markets are trading higher this morning (FTSE +1.91%). Today’s economic and earnings scheduled starting with the April Jobs Report , Wholesale Trade and earnings before the open from AOL, BITA, HZNP, JD, LMCA, and WWAV.
Hard Ups and Hard Downs
Our View : I’m going to keep this short and sweet. I think we see a higher than expected non-farm payroll number, a possible “countertrend” Friday (sell the early rally / news) and then up we go. I said the ES could get back up to 2090 yesterday and now I think it can go to 2098-to 2100 today. You can take it from there.
- In Asia 8 of 11 markets quoted closed higher : Shanghai Comp. +2.28%%, Hang Seng +1.05%, Nikkei +0.45%
- In Europe 12 out of 12 markets are trading higher : DAX +0.51%, FTSE +1.90%, MICEX +0.39, GD.AT +0.36% at 7.00 CT
- Fair Value : S&P -5.26 , Nasdaq -4.86 , DOW -58.47
- Total Volume: 1.43mil ESM and 6.4k SPM traded
- Economic Schedule: April Jobs Report and Wholesale Trade.
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