SPX and ES tagged our downside targets yesterday and proceeded to close at overhead resistance. Of course, that was before the overnight ramp got started. Now, with oil and gas breaking out in response to much of the country re-opening and VIX taking a larger than usual pre-market dive……ES is up 37 points and seemingly in the clear.

Is it time to jump on board stocks again?

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When Warren Buffett – normally one of the market’s biggest cheerleaders – says he can’t find any compelling buys, traders take notice.

“We have not done anything because we don’t see anything that attractive to do,

They might also be wondering just how ugly March Durable Goods (due at 10AM) will be and what to make of escalating tensions between the US and China.

S&P futures tagged our next downside target overnight and are struggling to retake the 20-DMA.

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Futures were off sharply overnight, tagging our SMA10 target, and even a little more as the moving average actually dropped a little (a rarity lately.)

As is so common these days, the rest of the backtest came after the close and before the cash market opened this morning – the better to keep the bigger players out of the mix. Meanwhile…remember that trade spat with China and how it disrupted markets? You know when Larry Kudlow goes on CNBC talking up King Dollar, it’s front and center all over again. And, with Trump looking to blame China for everything coronavirus related, you ain’t seen nothin’ yet.

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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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