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IT IS ALL ABOUT STOCK BUYBACKS!

WORKING AGAINST AN EVER SHRINKING STOCK POOL!?!

Click All Charts to Enlarge

MATASII: "Sustained Corporate Buybacks have been driving stock prices for over a decade and half. Resulting reduced floats and stock pools are resulting in increasing buyback volumes having an inordinate impact of equity market price distortions". Gordon T Long

1 - SITUATIONAL ANALYSIS

NERVOUS BUT STILL BULLISH

Though the Fear-Greed Index has slid slightly from 74 to 72, it is still at the high end of the Greed Scale (chart right top). From a longer term Overbought perspective it is at a major high (chart right bottom).

The combination of PE and VIX continues to signal a bullish outlook though we are clearly over-due for a near term corrective consolidation (chart directly below).

ONLY AN EVENT SHOCK WILL STOP EQUITIES FROM CONTINUING HIGHER IN THE INTERMEDIATE TERM!

FUND MANAGERS SURVEY

Fund Managers continue to overweight equities relative to staying on the sidelines in cash.

MARKET CONFIDENCE BUILT ON EARNINGS GROWTH , FED PIVOT & NO RECESSION

Rising earnings outlooks is assisting in supporting a strong "Risk-On" sentiment (chart right).

Earnings is supported by increasing GDP growth outlooks and improving Leading Earnings Indicators (below left).

Morgan Stanley analysts (below right) are fairly representative of the Sell Side consensus.

CORPORATE STOCK BUYBACKS

As the chart at the top of this "Current Market Perspective" section illustrates, it is Corporate Buybacks that have been playing a dominate role in rising equity prices over the last decade.

It is our view, as a result of a shrinking stock pool, corporate buybacks are having an even more pronounced impact. Increasingly, fewer stocks are available for Corporate Buyback thereby increasing upward pressure on prices.

See our warning video on the "Disappearing Equity & Float Pools".

CHART RIGHT - TOP

Corporations will continue to be the largest source of US equity demand in 2024. A surge in share buybacks and continued growth in cash M&A will be the primary drivers of corporate equity demand.

CHART RIGHT - BOTTOM

Though the available stock pool continues to shrink, the buyback volumes are only increasing!

The Mag-7 stocks have been major buyers of their stocks (notably AAPL).

2 - FUNDAMENTAL ANALYSIS

US DOLLAR WEAKNESS IS NORMALLY GOOD FOR STOCKS!

The market is focused on the "Golden Cross" (50 DMA crossing upward through the 2000 DMA) that recent upward movement in the US Dollar has potentially triggered. A rising dollar is typically not good for stocks.

We are not in that camp since all three major moving averages (50,100 & 200 DMA) are all tightly banded. Instead we we are focused on the the fact that the 100 DMA has triggered a Death Cross with it recently crossing the 200 DMA to the downside.

We suspect the Golden Cross will cause some consternation in the equity market before reversing downward. A weak US dollar will add support to equities during this election year.

Better activity data and sticky prices have provided support to US rates and the dollar through the early months of the year. However, the Fed has now told us it is not impressed by strong employment and that it thinks high early-year inflation may be down due to faulty seasonals.

A Fed signaling a commitment to cutting rates typically initiates a Dollar Bear Trend

• Having been held up through the first quarter on better growth and particularly higher inflation numbers, dollar support should soon start to fade.
• At its most recent press conference, Federal Reserve Chair, Jay Powell, made clear that the Fed is minded to cut rates. The Fed expects three cuts in 2024, some analysts expect five starting in June as the decaying employment situation becomes more evident.
• We look for the soft landing narrative to gain traction over coming months and expect a bullish steepening of the US yield curve and rate differentials moving against the dollar to see EUR/USD gently climb above the end-year consensus of 1.10.
• At the same time, we think a little too much is priced in for the European Central Bank cycle this year. We suspect just three cuts starting in June.

YOUR DESKTOP / TABLET / PHONE ANNOTATED CHART

Macro Analytics Chart Above:  SUBSCRIBER LINK

3 - TECHNICAL ANALYSIS

US EQUITY MARKETS

MAGNIFICENT SEVEN -- Surging Again!

YOUR DESKTOP / TABLET / PHONE ANNOTATED CHART

Macro Analytics Chart Above:  SUBSCRIBER LINK

CONTROL PACKAGE

There are FIVE charts we have outlined in prior chart packages that we will continue to watch closely as a "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 - Daily - Our Though Experiment

Our Though Experiment, which we continue to update, suggests we have put in a short 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 one higher degree. If the later occurs we could see the S&P north of 5500.

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!" We are presently inclined to wait until late Q3 / early Q4 to potentially SHORT US equities.

YOUR DESKTOP / TABLET / PHONE ANNOTATED CHART

Macro Analytics Chart Above:  SUBSCRIBER LINK

STOCK MONITOR: What We Spotted

BOND MARKET

CONTROL PACKAGE

There are FIVE charts we have outlined in prior chart packages that we will continue to watch closely as a "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)

FISHER'S EQUATION = 10Y Yield =10Y INFLATION BE% +REAL % = 2.35% + 1.89% = 4.24%

As rate-cut expectations fell from 6 this year to 3, Treasury yields rose... non-stop... all week with the belly of the curve underperforming (5Y yields up 28bps on the week). Yields all ended back up, below but near their year-to-date highs.

Wholesale Gasoline prices are rising and will soon be seen at the pumps. Service Inflation is sticky with upward pressure as are food prices. With Inflation Break-Evens rising and Y-o-Y inflation comparisons becoming harder we see potentially slightly higher bond yields before Year-End,

YOUR DESKTOP / TABLET / PHONE ANNOTATED CHART

Macro Analytics Chart Above:  SUBSCRIBER LINK

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