The Morning Call
5/22/26
The
Market
Technical
Thursday in the charts.
Summary:
A lot of sound but no fury... The usual sell-the-news action
following NVDA's earnings (blockbuster) combined with the 'off-again,
on-again' Iran peace deal (Iran wants to keep its uranium), WMT
worries, and Quantum treats, triggered significant volatility
in every asset class today. Initial moves reversed yesterday's price action, but
the afternoon brought relief ('final draft' of peace plan reportedly
circulating). By the close, oil was down small, S&P/Nasdaq flat,
gold, bitcoin, and the dollar flat with mixed yields (short-end lagging). "Every
f**king day the algos trigger chaos on completely unconfirmed reports that
simply reiterate the same status quo," said one of the more pensive
traders we know, and "it's f**king impossible to trade within any risk
budget." We hear similar refrains from many desks. But we panic-bid
stocks (puked crude) today despite having to put away the Mission Accomplished
signs away for another week ('launch
of negotiations on outstanding issues within seven days‘) ... 'Hope is not a strategy' is being replaced
by 'hope is a tactical trade!'
Thursday in the
technical stats.
https://www.barchart.com/stocks/momentum
https://www.barchart.com/stocks/market-performance
https://www.barchart.com/stocks/sectors/rankings
https://www.barchart.com/stocks/signals/new-recommendations
The calm before
the volatility storm.
https://www.zerohedge.com/the-market-ear/calm-volatility-storm
Summary:
Volatility keeps getting crushed even as bond volatility and macro uncertainty
move the other way. VIX is now approaching what increasingly looks like a
natural floor, while equities continue behaving as if the recent explosion in
bond volatility simply does not matter. The problem is that volatility regimes
tend to mean revert hard once markets shift back from calm micro-driven trading
toward macro-driven positioning. With implied correlations still depressed and
VIX seasonality turning more supportive, cheap convex hedges are starting to
look attractive again. Volatility is mean reverting and VIX is approaching what
increasingly looks like the natural floor.
Friday morning
setup: US equity futures are higher into the long weekend, with the S&P
500 gaining for an 8th consecutive week higher, its longest streak of weekly
wins since 2023 with sustained momentum in popular thematics, thanks to a
liquidity boost, supportive macro readings, solid earnings and hopes that the
US and Iran are moving closer to a peace deal, not to mention unrelenting
enthusiasm for artificial intelligence which is fueling a historic gamma
squeeze. As of 7:30am ET, S&P futures are 0.2% higher, cutting overnight
gains of 0.5% by more than half, and Nasdaq future gain 0.1% with most Mag 7
banes higher premarket led by GOOG/L (+0.4%) and NVDA (+0.3%). Bond yields
are 1-2bp lower led by the belly of the curve; the 10-year yield is down two
basis points to 4.55%; the softer-than-expected Japan CPI drove 30Y JGB yield
3.6bp lower (now back below 4%), which supported global bond markets. The USD
is higher, while commodities are mixed: WTI crude added $2.10 to $98.50 this
morning; precious metals are lower; Brent rebounded 2.6% to above $105 a
barrel, but remained lower for the week. Ags are higher. Economic data slate
includes May final University of Michigan sentiment (10am) and Kansas City Fed
services activity (11am). Fed speaker slate includes only Waller at 10am
Fundamental
Headlines
The
Economy
US
The May Kansas
City Fed manufacturing index came in at 8 versus estimates of 9.
The
May flash manufacturing PMI was 55.3 versus expectations of 53.8; the May flash
services PMI was 50.9 versus 51.1; the May flash composite PMI was 51.7 versus
51.5.
International
Q1 final German
GDP growth was +0.4% versus forecasts of +0.3%; the May business climate index
was 84.9 versus 84.2; the May current conditions index was 86.1 versus 85.1; the June consumer confidence index was -29.8 versus
-34.0.
April
UK retail sales fell 1.3% versus projections of -0.6%; ex fuel, they
were down 0.4% versus -0.3%.
April
Japanese CPI was +0.1% versus consensus of +0.5%.
Other
Update on credit
card balances, delinquencies and the debt to income ratio.
Update on Q2 nowcast.
https://www.capitalspectator.com/us-growth-nowcast-for-q2-holds-firm-as-inflation-risks-mount/
Are the latest housing
statistics telling us anything about a potential recession?
https://bonddad.blogspot.com/2026/05/an-exception-to-rule-maybe-housing-isnt.html
Iran
Another jerk off moment.
Rubio knew it.
So did the bond market.
https://www.zerohedge.com/markets/bond-market-about-break-washington
Monetary
Policy
The
Fed is losing control of rates ….and stocks don’t care.
https://www.zerohedge.com/the-market-ear/fed-losing-control-ratesstocks-still-dont-care
Summary:
Stocks keep behaving as if rates volatility, inflation pressure and widening
credit stress simply do not matter. Meanwhile, bond yields are breaking out
globally, AI capex is starting to look inflationary, and the Fed risks falling
further behind the curve. The melt-up still lives on, but the gap between
equities and rates is becoming increasingly hard to ignore. With VIX hovering
near what increasingly looks like a natural floor, cheap upside volatility
hedges are starting to look very interesting again. The dislocation between SPX
and inverse US 10-year yields remains massive.
Fiscal
Policy
Why are politicians so sure more houses are
the solution?
Inflation
Redefining inflation to obscure its origins.
(3)
Redefining Inflation to Obscure Its Origins
Investing
Is AI priced to perfection?
https://larryswedroe.substack.com/p/is-ai-priced-for-perfection
The dangerous brew that is rattling the bond
market.
Bond bear markets
always end with turmoil in stocks (are we in a bond bear market?).
https://www.zerohedge.com/the-market-ear/us-bond-bear-markets-always-end-turmoil-stocks
Summary:
Maybe the bond market finally noticed trillion-dollar deficits. Maybe it
noticed commodities. Maybe it noticed AI capex exploding into the real economy.
Either way, yields are moving higher — and history is not especially kind to
stocks when bond bear markets accelerate. The common denominator across almost
all these charts is simple: markets may still be underestimating how
structurally sticky inflation and interest rates could become.
News on Stocks in Our Portfolios
What
I am reading today
Is China destined
to replace America as the world’s superpower?
Visit Investing
for Survival’s website (http://investingforsurvival.com/home)
to learn more about our Investment Strategy, Prices Disciplines and Subscriber
Service.
