Powell’s press conference was everything a bull could want: unlimited support for an unlimited time, propping up everything the law might allow – and maybe more.  But, we already knew that. As I asked yesterday morning, how do you improve upon “whatever it takes?”

The market rallied anyway, spiking past an important Fib level on more Remdesivir hopium and a fair amount of short covering.  This morning, we find that the economy is doing even worse than expected……millions of people are still being laid off with the latest tally topping 30 million……and thousands of people are still dying of COVID-19 every day. And, the trillions that central banks are throwing at the markets won’t change any of the above.

Futures have given up the 61.8% Fib support and are headed south.continued for members… (more…)

It was perhaps inevitable that the latest Remdesivir puff piece would hit mere seconds before the (not coincidentally) delayed and (even more) disastrous -4.8% GDP (vs -3.5% expectations) print.

At -7.8%, personal consumption dropped more than it has in 40 years.But, pay no attention to the crumbling economy.  Remdesivir! (which killjoy Scott Gottlieb reminds us is not a cure and peer-reviewed research presented in The Lancet reminds us has no net benefit versus a placebo.)

In this study of adult patients admitted to hospital for severe COVID-19, remdesivir was not associated with statistically significant clinical benefits.

The net effect: a 73-pt (so far) ramp job off the after-hours lows on a day when it’s hard to imagine what more the FOMC might do to push stocks even higher.  How do you improve on “whatever it takes?”For those who missed it, CNBC’s interview with former Dallas Fed President Richard Fisher was quite interesting. The highlight was his prediction that the Fed’s balance sheet expansion is targeting $10 trillion. As a frame of reference, the market cap of the entire S&P 500 at the end of March was $21.4 trillion.  Japan, here we come.

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Some say that it makes sense the market is off only 16% from its highs in the middle of the biggest economic meltdown since the GFC because it’s forward-looking.  Things will be better 2-3 quarters from now, so it’s anticipating the return to normalcy. So, how do we explain its ongoing failure to anticipate the impact the COVID-19 pandemic would have on the global economy?

A better explanation is that central banks have directly and indirectly crushed volatility.  VIX is off 28% since Apr 21 and 60% since Mar 18.Stocks have responded accordingly, with this weekend’s ramp job just the latest “breakout” from a bearish chart pattern and the sixth time in a row when an initial downturn during the after-hours reversed to a strong rally going into the open.

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March durable goods plunged 14.4%, falling even greater than the expected 12% drop. This is the worst read since 2014 and the second worst since the GFC.

Meanwhile, COVID-19 deaths in the US topped 50,000 as daily growth in cases and deaths remains stubbornly high…

…and, in the world, nearly 200,000 have died and cases have topped 2,750,000.

The most promising therapeutic, remdesivir, was dealt a setback when results of a study in China implied it was not useful at all.  The FDA should announce hydroxychloroquine’s uselessness later today.

The futures, of course, ignored all this and have rallied 55 points – the third session in a row… …on the back on VIX’s nearly 20% smackdown since Tuesday.continued for members… (more…)

Futures were flat until 8:00, when VIX’s pre-opening dump was unleashed, popping ES back above its 10-DMA. ES studiously avoided retaking its SMA10 at yesterday’s close, slumping almost 40 points from its highs.

Today, the battle should be between VIX’s continuing beatdown – now 16% off Tuesday’s highs – and USDJPY’s impending death cross.

As always, ignore the politicians, particularly Dr. (not) Steven Mnuchin’s prediction that most, if not all, of the economy should be open by later in the summer.

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We’ve been bearish on oil for ages, shorting back in October 2018 and playing most of the bounces and downdrafts along the way. So, we weren’t terribly surprised when May WTI futures dropped to zero, having suggested that very possibility when CL was testing its channel bottom just last week.

A drop through 19.27 would be reason enough to revert to short with 17.12 and 10.65 the only support between here and zero.

The drop to -40, however, was pretty shocking. The other huge surprise is that the Fed didn’t step in and “fix” things.

Futures held up remarkably well under the circumstances, though we’re seeing more fallout this morning, with ES currently off about 2%.This sets up an important test for ES and potentially SPX – the 2.24 Fibonacci extensions at ES 2728 and SPX 2703. More importantly, it could quite possibly trigger widespread selling as the 10-day moving averages (SPX 2775.12) and channel bottoms are breached – the two we identified as potential sell signals two weeks ago:

As we discussed last week, SPX’s SMA10 has crossed above its SMA20 – a bullish cross… For those inclined to follow the Fed’s lead, the safe strategy is to keep your stops reasonably close and to watch out for a drop back through the SMA10 and/or channel bottom. Either one is a signal for traders to sell and for buy-and-hold types to rein in risk.

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On “news” of a potentially beneficial therapeutic and the promise of reopening parts of the economy in the days ahead, the S&P futures have shot up above the 50-day moving average. We shouldn’t be surprised.

This, in fact, has been the way this recovery has worked from the very beginning. Every single moving average has been topped via a gap higher on something or another, with the biggest gap higher accomplishing the 10/20 cross on April 6.

It’s a gambit which has worked beautifully so far. While pundits debate which letter of the alphabet this rebound will most resemble, SPX has regained its 50% retracement in 13 sessions versus the 17 it took during the V-shaped recovery in Dec 2018-Jan 2019 – when the world wasn’t gripped by a pandemic and a stunning drop in GDP.

Unfortunately, that is our lot. And, as the futures start to slip coming up on the open, the gap higher method is going to fall a little short.

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