Bank of America

Bank of America

Frontrunning: March 30

  • Bad News Is Great News: Cautious Yellen drives world stocks near 2016 peaks (Reuters)
  • Yellen Spurs Global Stock Rally as Oil Rebounds, Dollar Tumbles (BBG)
  • Trump drops pledge to back Republican presidential nominee other than himself (Reuters)
  • Second judge says Clinton email setup may have been in 'bad faith' (Reuters)
  • Brussels Airport Remains Shut as Police Hunt Third Attacker (BBG)

Here Are The Four Reasons Why Investors Never Believed This Rally

The "smart money" have been net sellers of US stocks for the ninth consecutive week.
Investors are positioning for a market reversal based on leveraged positions in volatility funds.
Oil bulls never jumped on board the latest rally. 
The CS Fear Barometer remains elevated

3 Things: 80% Or Bust, Mind The Gap, It’s A Bunny

“The McKenzie study also noted that on average “analysts’ forecasts have been almost 100% too high” which leads investors to make much more aggressive bets on the financial markets. “

The Next Critical Level For The S&P: Stay Above 2,028 Or Channel Support Is Broken

The S&P 500 is stalling below 2085 as daily momentum for price action and especially market breadth is waning. Similar to early November, confirmation of a near-term S&P 500 peak could come on a close below rising channel support near 2028 with daily Williams %R moving out of overbought. This would place the focus on the 200 and 100- day MAs near 2017 and 1997, respectively, which are ahead of chart support at 1969- 1947.

Bloomberg Explains Why "Nobody Believes This Rally"

"I’m not buying anything; I’m sitting on my hands and waiting. I would definitely sell this rally because it’s totally central-bank driven and has nothing or very little to do with fundamentals."..."The question everyone should be asking is what has really changed in the last three months? Global concerns, while slightly less, are still there."

Frontrunning: March 21

  • Oil Drops With Emerging-Market Currencies on Rig Recovery Signs (BBG)
  • A plea for help - How China asked the Fed for its stock crash play book (Reuters)
  • Obama to meet Raul Castro on historic Cuba trip (Reuters)
  • Wall Street's Pile of Unwanted Treasuries Exposes Market Cracks (BBG)
  • Dimon's Timing Looks Savvier by the Day as Equities Rebound (BBG)

JPM: The Short Squeeze Is Largely Over

"Three quarters of the previous selling of equity ETFs during January and February has been reversed in just three weeks. CTAs appear to have fully covered their shorts. Indeed both CTAs and Discretionary Macro hedge fund managers appear to be close to neutral right now... we conclude that the short covering phase that started a month ago is very advanced."

A Strange Pattern Emerges When Trading The US Dollar In 2016

As Bank of America's FX quant strategist writes, "ahead of the Fed, the USD was already trending lower against 8 out of 9 G10 currency pairs with GBP being the only exception. The surprisingly-dovish Fed has only further accelerated the decline in the US dollar. The decline started in late January and has occurred during the critical local New York trading hours. The US hours downtrend looks likely to continue in the near future."

Buyback Blackout Period Starts Monday: Is This The Catalyst That Ends The S&P Rally?

"Buyback blackout period starts Monday. An increasing number of S&P 500 companies will enter into their blackout period starting next week, about a month before the earnings season kicks into high gear in the third week of April."  This is taking place as institutional clients have been aggressively dumping stocks for the past seven weeks, while corporations have been soaking up all this liquidating activity. Should the selling continue for yet another week, who will soak up the selling this time?

Bank of America: "The Impact Of A Very Dovish Message Is Bad For Risk Assets"

In a note that may have been quite prescient, BofA's HY strategist Michael Contopoulos released a note last night titled "Fed acknowledges global growth concerns… again", in which he said that "we have to admit; today’s dovish comments by Yellen took us by surprise" and adds that "although the market’s initial reaction was positive, we think the longer run impact of a very dovish message is bad for risk assets. In fact, we’re a bit amazed by the initial response from high yield today."

Here Comes The Big Flush - Recession Pending, Fed "Put" Ending

If it sounds like history repeating itself, it most surely is.  The coming recession will again obliterate the sell side hockey sticks, which this time started last spring at $135 per share for 2016 and are already being reduced at a lickety-split rate not seen since the fall of 2008. But this time there is one thing that decisively different, and it will make all the difference in the world. As will be reinforced once again by the post-meeting contretemps on Wednesday, the Fed has painted itself into a deathly corner and is utterly out of dry powder. It has nothing left but to hint at the prospect of negative interest rates. And that will be usher in its thundering demise.