Today’s Notes

Note: To the extent that I express my short-term outlook on markets, a sector or a commodity in my log entries, these are not to be the least bit construed as trade recommendations for the reader. They are, under present conditions in particular, subject to change without notice. What might appear to the reader as a viable trade idea today, could be something I’ll do an about face on — as new information presents itself — tomorrow, with no prior warning. I share excerpts from my notes only when I deem them useful in terms of helping our clients maintain proper perspective.

After hours:

This week’s major rally was classic bear market action, in my view. Panicky deleveraging selloff, followed by the arrival of monetary and fiscal stimulus sparking a sharp rally — aided by shorts getting caught offside — that likely fails as the market begins to ponder what’s next. 

Today’s 3+% selloff during the last half hour of trading, and futures finishing the after hours session another .5% lower (following the day the stimulus bill finally passed), speaks to market concerns over what’s next.

Also true to form is the punditry who are stepping up and telling of bargains and bottoms. Sadly, what is the result of wishful thinking and conflicts of interest virtually every time (this early into a bear market) suffices to suck unsuspecting investors into a market that is in all likelihood quite a ways (in time and degree) from fully discounting real world realities.

Here’s part of an email conversation with a client earlier today:

In a nutshell: Bear markets (and the information embedded in them) move at multiple times the speed of bull markets. And when we’re managing non-correlated (to stocks) asset classes, along with hedging, constant monitoring and tweaking is an absolute must.

Hopefully you’re keeping up with my blog posts (the “log entries” in particular)… There you’ll get a pretty thorough understanding of conditions, and how we view them… Been through every bear event since ’84, and studied all of the ones prior… Again, they require a far more tactical than the norm approach — and, by the way, all information/rhetoric you receive through the financial media (folks calling bottoms etc.) should be dismissed out of hand… Bear markets are where the biggest mistakes are made!

Newsflash this evening is that the White House will suspend tariff collections for 3 months, but that companies will have to pay them at a later date. Since tariffs had been such a hot market topic previously, we could see a bit of a pop on that news come Monday. But to put numbers to it: Annual tariff revenue amounts to ~$70 billion. Three months worth — $17,500 billion — equals what amounts to additional relief (assuming trade continues at last year’s pace over the next 3 months, it won’t) of 0.8% of the $2.2 trillion stimulus package. So, fundamentally, not a market mover. Sentimentally? Maybe…


SPX, after opening down ~4%, oscillated between 2530 and 2560 for roughly the first four hours of trading, then, upon the announcement that the stimulus bill passed it rallied above 2560, tested it 30 minutes later and has since ranged between there and 2580. I.e., swing traders have exploited two tradable ranges all morning.

Yesterday, minutes before the close, SPX rallied 2% in 2 minutes to close right at the day’s high. Presumably, a huge round of qtr-end rebalancing came in all at once.

The less than stellar move on the stimulus bill passing (spx still off 2% as I type) speaks to reality setting in for market actors. Although, that said, reality would have stocks barreling through recent lows. So, I’ll say it either speaks to a bit of dangerous complacency or the waiting to be certain that another big round of rebalancing won’t send shorts into panic mode, having them cover and exacerbating any up move that may result — like it did yesterday.

Bottom line: Near-term odds strongly favor a testing of the lows (if not blowing right through them) anytime between now and month-end.


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