Remember the shale gale and Saudi America? The scale of those outlandish delusions has now dwindled to plays in a few counties in West Texas and southeastern New Mexico. Saudi Permian. It’s a race to the bottom as investors double down on the tight oil companies that can still tell a growth story.
Even if the current rally in excess of 20% from the February low is the last one of the cyclical bull market from 2009, BofAML says there should more room to run. The average rally of at least 10% that is the last rally of cyclical bull trend has an average return of 46.88% and an average length of 13.1 months.
The problem for individual investors is the “trap” that is currently being laid between the appearance of strong market dynamics against the backdrop of weak economic and market fundamentals. Ignoring the last two to chase the former has historically not worked out well.
"Long bonds, short the Fed funds futures. Long equities but long bonds. Long gold but long equities. Long the dollar and long the precious metals. It is next to impossible to make sense out of this; I’m not even sure Graham or Dodd could if they were still alive."
The current oil-price rally led many to believe that a full price recovery was underway. But inventories have been too large for that to happen short of epic supply interruptions. U.S. rig counts have surged as oil prices sink. Capital is driving the oil markets and it enables bad behavior by producers. That is why oil prices will stay low. The oil-price rally that began in February is over.
Having tagged last Thursday's intraday highs, S&P futures are fading this morning (for now), as Bloomberg notes, U.S. stock-market internals are exhibiting conflicting signs as the rally in the S&P 500 Index approaches 10% from the low reached after Brexit.
“The bigger the down move today, the more they have to sell, which would basically create a vicious cycle,” Cheong, head of Americas equity derivatives strategy at UBS, said in a phone interview. “We’ll see front-loaded selling in the range of $100 billion to $150 billion over the next two to three days. It could be very similar to August in terms of model-based selling.”
In yet another twist in the Chicago pension saga, Illinois lawmakers voted to override a veto by Governor Bruce Rauner and allow the city to defer payments to fund pensions. Meanwhile, in order to fill Illinois' empty coffers, a bill is in its early stages that would target trades on the CME, CBOE, and other markets revisiting an old idea: a tax on trading
Think back over the last 10 years - how different was your life in April 2006? While you may think your daily existence is largely the same (maybe the kids are older or you’re married now, but that about it…), consider what was actually different about your life in the spring of 2006:No iPhone;No Facebook (unless you were in college at the time); No Twitter; No Instagram; No Kim Kardashian; No Uber; No iPad.
The stock surge from February is at risk, warns BofAML's Stephen Suttmeier as a plethora of bearish divergences could cap further gains from here. 2044-2022 are key nearby S&P 500 support for April, but a loss of 2022 is required to break the last higher low from 3/24 and suggest a deeper decline for the S&P 500. The following 15 risk-factors - from VIX term structure steepness to Dow Theory Sell signals - all point to a retest of the recent 1810-1820 lows.