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NO PANIC BUT INCREASING WORRY

A CORRECTIVE / CONSOLIDATION IS THE BEST THING THAT COULD HAPPEN!

(IF YOU WANT HIGHER EQUITY MARKETS!)

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NVDA: As goes Nvidia, so goes the Mag-7. As goes the Mag-7 so goes the market!!

1 - SITUATIONAL ANALYSIS

Sell in May and Go-Away

Sell in May and go-away is around the corner .. the first two weeks of May represent the 4th worst two-week period of the year. If the markets don't rally / retrace in the second half of April (seasonality wise in strong), then things could get ugly for Equities - fast!

CHART TOP RIGHT: The market has seen more Hindenburg Omens than in any year since the peak

CHART BOTTOM RIGHT: The Tax Day has now come and gone, remembering some states had an additional day or two due to state holidays. Since 2000, during the first half of April stocks don't do much. Then as soon as you get past April 15, the second half is usually strong.

CHART BELOW: Nothing new really but worth a reminder: 1. Equity Performance: Equities are significantly higher year-to-date, near all-time highs, primarily driven by valuation expansions, despite a sharp rise in bond yields and a shift in Fed expectations due to sustained inflation. 2. Inflation Impact: Persistent high inflation increases the likelihood of prolonged higher interest rates, potentially affecting economic activity and equity valuations. 3. Market Risks: The current market relies on smooth inflation reduction, a dovish Federal Reserve, and reduced growth risks. Continuation of high inflation and growth rates could lead to a market correction due to a tighter stock vs bond risk premium. 4. Geopolitical Tensions: Inflationary pressures are exacerbated by potential increases in oil prices due to geopolitical tensions in Russia and the Middle East. 5. Investor Positioning: Investor exposure is high with cash allocations at historically low levels, suggesting vulnerability to market shifts.

SENTIMENT STEADILY "ADJUSTING" LOWER1

We are moving further into fear territory. This sell off feels very well behaved so far. Let's see if we can get more panic going.. (chart right).

CHART BELOW

Lot of fear across various indicators, but things haven't really spilled over to equities...yet.

2 - FUNDAMENTAL ANALYSIS

We are a strong believer that Credit Markets LEAD and Equity & Bond Markets FOLLOW. Let's look at the Bond Market (MOVE) and the Equity Market (VIX) before we look at the Credit Markets (CDX).

VOLATILITY - MOVE & VIX

It took bond volatility, MOVE, three months to reach more "normal" levels of volatility. This has been reversed in a few sessions basically. The latest move in the MOVE has been huge (CHART RIGHT)

CHART BELOW

Remembering that you don't compare mean reverting to trending assets, the gap between bond volatility and SPX is now simply huge.

The reaction in VIX has been extreme.

Last time we had a similar pick up in VIX was in Sep/Oct. The initial move higher in VIX was accompanied with a 5.5% sell off in SPX.

The VIX eventually surged even higher during the autumn, and the total SPX sell off reached around 8%.

SORTING OUT VOLATILITY v CREDIT MARKETS

Credit protection is up, but far from panic.

While the VIX has exploded to the upside, credit protection, CDX IG, is showing much less panic (chart right)

Compare SPX to the CDX IG and you realize this appears at this stage to be nothing more than just a normal sell off, with little panic. (Chart Right shows SPX vs CDX IG inverted.

CHART BELOW: The High Yield Credit sector as represented by the "JNK" is currently reflecting nothing more than a consolidation to the 200 DMA before completing a potential final leg up. This is normally good for the equity markets.

YOUR DESKTOP / TABLET / PHONE ANNOTATED CHART

Macro Analytics Chart Above: SUBSCRIBER LINK

3 - TECHNICAL ANALYSIS

THE HEADLINE MARKET: MAGNIFICENT 7

• We are reaching the vertical lift part of the parabolic (geometric) lift shown by the dashed red line.
• We have intermediate term Divergence with momentum (bottom pane).
• In the short term Momentum has rolled over but hasn't yet decisively broken the Momentum trend line support. (bottom pane).

MATASII CROSS: WEEKLY - CONTINUES TO SIGNAL A MAG-7 BUY

YOUR DESKTOP / TABLET / PHONE ANNOTATED CHART

Macro Analytics Chart Above:  SUBSCRIBER LINK

"CURRENCY" MARKET (Currency, Gold, Black Gold (Oil) & Bitcoin)

CHART RIGHT: As gold pushes to higher & higher record highs (in USD terms), Real yields refuse to play along (above right)?? 

I side with BoAML's Michael Hartnett and believe that what we are seeing is Gold aggressively discounting a coming collapse in Real Rates. 

CONTROL PACKAGE

There are EIGHT charts we have outlined in prior chart packages which we will continue to watch closely as a CURRENT "control set".

1. US DOLLAR -DXY - MONTHLY (CHART LINK)
2. US DOLLAR - DXY - DAILY (CHART LINK)
3. GOLD - DAILY (CHART LINK)
4. GOLD cfd's - DAILY (CHART LINK)
5. GOLD - Integrated - Barrick Gold (CHART LINK)
6. OIL - XLE - MONTHLY (CHART LINK)
7. OIL - WTIC - MONTHLY - (CHART LINK)
8. BITCOIN - BTCUSD - WEEKLY (CHART LINK)
9. 10y TIPS - Real Rates - Daily (CHART LINK)

GOLD cfd's - DAILY

The 3 Std Deviation band for Gold has gone almost vertical with Gold prices tracking it!! Frankly, in over 40 years I don't believe I have seen this technically occur with a 3 Std Dev in Gold? Something is either broken, panic has set in somewhere or there is an "elephant(s)" now playing the market?

NOTE: Gold CFD's have not corrected (below) whereas Gold Bullion has.(GOLD - DAILY (CHART LINK))

YOUR DESKTOP / TABLET / PHONE ANNOTATED CHART

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INTEGRATED GOLD MINERS

We have a close eye on Gold and the INTEGRATED GOLD MINERS as represented by Barrick Gold.

Barrick has broken out of its long term declining overhead resistance trend. It has been pulling back this week as Gold Bullion has.

It is likely time to be adding to your Gold and Silver positions on pullback opportunities.

YOUR DESKTOP / TABLET / PHONE ANNOTATED CHART

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US EQUITY MARKETS

CONTROL PACKAGE

There have FIVE charts we have outlined in prior chart packages that we will continue to watch closely as a CURRENT "control set".

1. The S&P 500 (CHART LINK)
2. The DJIA (CHART LINK)
3. The Russell 2000 through the IWM ETF (CHART LINK),
4. The MAGNIFICENT SEVEN (CHART ABOVE WITH MATASII CROSS - LINK)
5. Nvidia (NVDA) (CHART LINK)

S&P 500 CFD

YOUR DESKTOP / TABLET / PHONE ANNOTATED CHART

Macro Analytics Chart Above:  SUBSCRIBER LINK

S&P 500 - Daily - Our Though Experiment

Our Though Experiment, which we have discussed previously, suggests we have put in a near term top (or very close to it) and will now consolidate before possibly completing one final small impulse higher or put in a 1-2 Wave of a much higher degree.

NOTE: To reiterate what I previously wrote - "the black labeled activity shown below, between now and July, looks like a "Killing Field" where the algos take Day Traders, "Dip Buyers", "Gamma Guys" and FOMO's all out on stretchers!"

YOUR DESKTOP / TABLET / PHONE ANNOTATED CHART

Macro Analytics Chart Above:  SUBSCRIBER LINK

STOCK MONITOR: What We Spotted

MONDAY

• The stock sell-off continued Monday to see the S&P 500 lose 2.6% across Friday and Monday, its largest two-day sell-off in more than a year, and now closing beneath its 50d MA for the first time in five months, according to Bloomberg, reflective of the weakening technical backdrop for risk assets.
• The VIX climbed above 19. While stock futures had made a recovery attempt during the overnight session after geopolitical hedges from the weekend were unwound, later reporting Israel was working on a retaliation contributed to renewed risk off conditions during stateside trade, with gold, oil, and haven currencies all finding some momentum into the APAC session here.
• Treasuries saw heavy losses, with the focus returning to the hot US economic conditions, highlighted by the massive beat in retail sales earlier, although yields did pare off highs as the geopolitical angst rose again into the NY afternoon.
• The Dollar Index hit new YTD peaks, while USD/JPY also found new multi-decade highs above 154, although some of the Iran/Israel angst has put a stop to the Yen's rot for now.

INFLATION BREAKEVENS: 5yr BEI +3.7bps at 2.494%, 10yr BEI +3.4bps at 2.440%, 30yr BEI +3.0bps at 2.368%.

REAL RATES: 10Y -- 2.1681%

STOCK SPECIFIC

• Goldman Sachs (GS) +3%: Earnings impressed; EPS, revenue, and other key metrics all beat, alongside a strong revenue breakdown.
• Charles Schwab (SCHW) +2%: Post-earnings, CFO expects net interest margin expansion through 2024. In earnings, they were mixed - top and bottom line marginally beat, but internals were more mixed.
• Tesla (TSLA) -5%: Lays off "more than 10%" of its global workforce. Separately, CEO Musk announced a cut in the price of the FSD package to USD 99/month.
• Apple (AAPL) -2%: iPhone shipments fell 10% in Q1 and short of Wall St. expectations as it was hurt by intensifying competition by Android, according to IDC.
• Informatica (INFA) -7%, Salesforce (CRM) -7%: Salesforce is in advanced negotiations to acquire Informatica, WSJ reports. The sources add the price being discussed is below INFA''s current share price of USD 38.48.
• Blackbaud (BLKB) +3%: Clearlake offers USD 80/shr to acquire Blackbaud (BLKB). Note, BLKB closed Friday at USD 76.72.
• Snap One Holdings (SNPO) +30%: To be acquired by Resideo (REZI) -4% for USD 10.75/shr. Note, SNPO closed Friday at USD 8.14/shr.
• Encore Wire (WIRE) +11%: To be acquired by Prysmian for USD 290/shr. Note, WIRE closed Friday at USD 260.98.
• Medical Properties Trust (MPW) +18%: Sold stakes in five Utah hospitals to a new JV with an affiliated investment fund for USD 886mln.
• Cisco (CSCO) -0.5%: Upgraded at BoFA citing three catalysts for growth acceleration.
• Alcoa (AA) +4: Benefitting from the surge in Aluminium prices.
• Lockheed Martin (LMT) +0.6%: Wins US missile defence contract worth USD 17bln, according to Reuters sources.

TUESDAY

• Stocks were choppy on Tuesday amid hawkish Fed speeches and mixed earnings reports as the indices attempted to find some ground after recent selling, with the VIX back under 19 and a lack of response (so far) from Israel.
• There were two key Fed speeches with both Vice Chair Jefferson and Chair Powell himself walking back comments around rate cuts, that weighed on Treasuries as yields continued to climb higher.
• There are now 40bps of cuts priced for the year in money markets vs 44bps beforehand.
• Banks were an area of weakness with Bank of America (BAC) and Bank of NY Mellon (BK) dipping post-earnings, although Morgan Stanley (MS) outperformed.
• Meanwhile, tech found some general recovery, while a solid UNH report supported Healthcare.
• The Dollar was ultimately flat. Note a mini-flash crash in USD/JPY in the NY morning ignited suspicions of BoJ intervention, although note the pair has recovered already.
• Oil prices were flat, although nat gas saw a late session spike which was followed by TC Energy (TRP) announcing it was responding to an incident in Yellowhead County involving NGTL with the affected section of pipeline having been shut down.

INFLATION BREAKEVENS: 5yr BEI -0.4bps at 2.495%, 10yr BEI -0.8bps at 2.429%, 30yr BEI -0.1bps at 2.366%.

REAL RATES: 10Y -- 2.239%

STOCK SPECIFIC

• Apple (AAPL) -2%: Insider sales from COO and CFO
• Microsoft (MSFT) flat: Plans to invest USD 1.5bln in G42, a UAE-based AI company with ties to China.
• Live Nation (LYV) -7.5%: Set to be sued by the DoJ, according to WSJ.
• Tesla (TSLA) -2.5%: Confirmed it is planning to layoff 10% if its global workforce. Following this, JPMorgan said TSLA layoffs show delivery miss about demand, not supply.
• Lockheed Martin (LMT) +0.5%: Secured a USD 17bln contract from US Missile Defense Agency.
• AMD (AMD) +2%: Upgraded at HSBC on reset expectations.
• Amazon (AMZN) flat: Prime subs jump 8% in US to new high of 180mln, according to Consumer Intelligence Partners.
• Envestnet (ENV) +9.5%: Is exploring options including a sale with the help of a financial advisor, according to Reuters sources.

WEDNESDAY

• Stocks were sold on Wednesday with losses led by the Nasdaq as the Tech sector underperformed with semis weighed on by a poor ASML earnings report.
• Stocks had pared some of the weakness after a stellar 20yr bond auction before selling resumed into the closing bell.
• Elsewhere, the Dollar was sold as it tracked US yields lower which in turn supported the Yen, Franc and Euro but the Antipodes outperformed despite the risk-off tone of trade.
• GBP only saw slight gains vs the Buck but it was weaker vs the Euro despite hotter-than-expected inflation, but BoE officials did not seem too concerned. There were few developments on geopolitics today other than reports suggesting Israel was going to respond to Iran on Monday, but ultimately decided to wait - a response seems a given but it is still a matter of when and how.
• Elsewhere, trade concerns between the US and China are rising after US President Biden was calling for higher tariffs on Chinese steel.
• The lack of updates saw oil prices pare some of the recent strength with inventory data showing a larger build than expected supporting the move while gold prices saw slight losses, despite the weaker dollar.
• Attention turns to more Fed speak overnight and on Thursday, with Thursday US data focusing on Jobless Claims, Existing Homes Sales and the Philly Fed business index.

INFLATION BREAKEVENS: 5yr BEI -3.0bps at 2.457%, 10yr BEI -2.2bps at 2.400%, 30yr BEI -2.1bps at 2.341%.

REAL RATES: 10Y -- 2.1858%

STOCK SPECIFIC

• Tapestry (TPR) -1% Capri (CPRI) -3%: FTC is preparing to sue to block Tapestry's USD 8.5bln takeover of Capri Holdings, according to NYT.
• Mobileye (MBLY) +3%: Secured orders for 46mln of the EyeQ6 Lite driver-assistance chips.
• Eli Lilly (LLY) +0.5%: Weight loss drug (Trezepatide) met all primary endpoints and key secondary endpoints in two Phase 3 clinical trials.
• Sage Therapeutics (SAGE) -20%: Phase 2 study of dalzanemdor did not meet primary endpoint.
• Autodesk (ADSK) -6%: Said it will further delay its annual 10-K filing due to an ongoing internal investigation of its board of directors.
• Knight-Swift Transportation (KNX) -4%: Lowers Q1 and Q2 guidance.
• Microsoft (MSFT) -0.7%: To reportedly avoid a formal EU probe over USD 13bln OpenAI deal, according to Bloomberg.
• Zuora (ZUO) +12%: Exploring potential options after receiving acquisition interest from potential buyers, according to Reuters sources.
• Snap (SNAP) +5%: US House Speaker Johnson says TikTok divest-or-ban bill is moving fast through Congress.

BOND MARKET

CONTROL PACKAGE

There have FIVE charts we have outlined in prior chart packages that we will continue to watch closely as a CURRENT "control set".

1. The 10Y TREASURY NOTE YIELD - TNX - HOURLY (CHART LINK)
2. The 10Y TREASURY NOTE YIELD - TNX - DAILY (CHART LINK)
3. The 10Y TREASURY NOTE YIELD - TNX - WEEKLY (CHART LINK)
4. The 30Y TREASURY BOND YIELD - TNX - WEEKLY (CHART LINK)
5. REAL RATES (CHART LINK)
6. FISHER'S EQUATION = 10Y Yield = 10Y INFLATION BE% +REAL % = 2.400% + 2.1858% = 4.586%

WEDNESDAY TREASURY AUCTION

Another super strong demand showing for 20yr Treasuries with the USD 13bln reopening stopping through the WI by 2.5bps, the largest stop-through since 2023, better than March's 2bp stop-through and the six-auction avg. 0.2bps. The auction was covered 2.82x, above the prior 2.79x and avg. 2.57x, Dealers were left with 9.1%, beneath the prior 9.3% and avg. 13.7%, with Indirects taking a chunky 74.7%, above the prior 73.5% and avg. 68.0%. After recent heavy selling, the auction was seen as a litmus test for dip-buying appetite, and it has clearly passed with flying colors.

Yields fell on the 10Y TNX (below)

YOUR DESKTOP / TABLET / PHONE ANNOTATED CHART

Macro Analytics Chart Above:  SUBSCRIBER LINK

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