Monday Moring Cgartology

 

The Morning Call

 

5/18/26

 

I somehow managed to delete all my Friday and weekend work on the addition this morning. I tried as fast as I could to reconstruct the technical and economic narrative as best I could. My apologies.

 

The Market

         

    Technical

 

There is just no quit in this Market. The S&P was up for the week, although Friday’s pin action hardly fits the pattern. Unless we get some downside follow though (which the overnight news suggest is questionable), the technicals remain ‘full steam ahead’ with the S&P (1) making another new all-time high, (2) above all three DMAs and (3) in uptrends across all timeframes. The technical question in my mind is how long can this sprint higher last without a correction?

 

 Clearly, the stock market is brushing off any worries related to the destruction of the Middle East oil infrastructure and the accompanying surge in oil prices as well as the problems in the private credit market.

 

As you know, I approached this upside move cautiously---which couldn’t have been more wrong. Nonetheless, I am loath to chase this upswing, especially with (now) four gap up opens sitting below. The only good news in this trading error is that a number of stocks on my Buy List have remained within buying parameters. So with any retreat, I can make a delayed entry.

 

 

 

 

 

 

 

 

 

 

TLT was beaten like a rented mule on Friday, pushing below the lower boundary of its very short term trading range (if it remains there through the close today, it will reset to a down trend). That leaves it below all DMAs and in downtrends across all major timeframes. With stagflation the likely result of the destruction wrought on the oil infrastructure and a spendthrift government, I am hard pressed to think that bond prices are going to improve markedly.

 

           

 

 

 

 

 

Gold plunged on Friday. Not surprising given the shellacking that TLT took. So, it remains in a very short term downtrend marked by the top and now three lower highs. I am watching to see if it makes a new lower low.

 

The dollar rallied hard, pushing up through its 50 and 200 DMAs (both remain resistance but the 50 DMA will reset today and the 200 DMA on Wednesday in the absence of a retreat). In the process it filled those three gap down opens overhead. Nonetheless, I continue to believe that the macroeconomic backdrop of the US economy (rising inflation) suggests a low to lower dollar.

Monday morning setup:

 

    Fundamental

 

       Headlines

 

              The Economy

 

The US stats were balanced though all else was negative: the primary indicators (one plus, two neutral, two negative) and inflation (one neutral and one negative). Overseas, the data was overwhelmingly negative including the price measures (one neutral, three negative).

 

These numbers are a possible signal that inflation wrought by oil prices are starting to show up in the macro numbers. Of course, one week is hardly a trend but the logic is there and most Street experts are already on board with higher inflation.

 

On the other hand, the economic growth in the US remains on track and with the size of the AI spend continuing to grow it seems likely that it will remain so. Though not so much for the rest of the globe.

 

Bottom line: the economy is performing well and will likely continue to do so given (1) US energy independence, and (2) the level of AI spend. On the other hand, I remain firmly convinced that above average inflation is part of our near/intermediate term future.

 

                        US

 

 

                        International

 

                        Other

 

                        Iran

 

              Overnight news.

           

     Investing

 

 

 

    News on Stocks in Our Portfolios

 

 

What I am reading today

 

           

 

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The Morning Call---Bonds are screaming 'something is wrong'

 

The Morning Call

 

5/15/26

 

The Market

         

    Technical

 

            Thursday in the charts.

            https://www.zerohedge.com/markets/trumps-beijing-trip-triggers-bid-big-tech-bitcoin-bond-oil-gold-dip

 

Summary: A series of positive headlines from Beijing (and CSCO's outlook hike) supported the AI/Semis-engine driving stocks higher again (also helped by solid retail sales/claims). Oil ended higher (as Hormuz flow remains muted). Bitcoin followed along with an aggressive bid as silver and gold slipped lower. The dollar was bid but bonds were dumped late in the day. It was a correlation-one day once again with oil down, yields down, stocks up all in sync until the US equity cash market opened (and stocks decoupled higher again)... while AI and semis remain the market's upside engine, crowded positioning after historic gains makes future payoffs less assured. As Bloomberg's Michael Ball points out, investors who want to stay long have increasing incentives to sell historically rich calls to help fund protection against any cooling in momentum. In a perfect scenario, SpotGamma says that NVDA would release a final surge, which would place metrics like COR1M into the fully-overbought signal.

 

            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

 

            How to trade this upside squeeze.

            https://www.zerohedge.com/markets/goldmans-desk-reveals-what-will-end-markets-endless-gamma-squeeze-and-how-trade-it

 

Summary:  "In the period Monday open to Wednesday close the SPX has gained 45.32pts, a move entirely attributable to the Magnificent 7, which contributed +47.34pts — meaning the remaining ~495 constituents subtracted a net 2pts in aggregate." , last night Goldman's derivatives team had a simpler trade idea: the "desk likes outright puts here given how flat skew is, as well as upside in single names in the ADR space."

 

            The downside no longer matters.

            https://www.zerohedge.com/the-market-ear/downside-no-longer-matters

 

Summary: The upside panic continues accelerating while downside protection collapses beneath the surface. Investors are increasingly chasing upside exposure at the exact same time tail-risk hedging, skew, and put demand are all getting aggressively repriced lower. The market is starting to behave like downside risk no longer matters.

 

            Bonds are screaming ‘something is wrong’.

            (3) Bonds Are Screaming "Something's Wrong"

 

            One technician’s take on gold, silver and copper.

            https://talkmarkets.com/article/gold-to-10000-the-insane-inflation-data-why-im-waiting-for-one-final-flush-1778779197

 

Friday morning setup: Bond yields, oil and the dollar are surging this morning as US futures tumble from all-time highs, with Tech underperforming driven by a series of factors including i) surging energy prices on lack of Iran war progress, ii) elevated positioning into options expiry; iii) Central bank repricing, iv) Tech sell-off driven by higher yields, and v) strikes at Samsung Electronics. The combination of stronger consumption and higher inflation is also a factor today. As of 8:00am ET, S&P futures are down 1.0% and Nasdaq futures slide 1.4% with the momentum brigade of Semis and Memory dumping (that bastion of the memory trade, Korea, sold off last night, its worst day since early March). The losses point to a bleak end to a week in which chipmakers led a narrow rally despite steadily rising yields and the absence of a US-Iran deal. Cyclicals ex-Energy are, unsurprisingly, seeing material underperformance to Defensives. Bond yields are up 4-7bps as the Dollar looks to complete its first 5-day win streak since March. In commodities, Energy is leading with Brent rising 2.3% to above $108 a barrel. Helima Croft, global head of commodity strategy at RBC Capital Markets, said an expectation that the Strait of Hormuz would reopen within the next month was “magical thinking.” Precious metals tumble on dollar strength. Today’s macro data releases are all B-grade, including Empire Mfg, Industrial / Mfg Production, and Capacity Utilization; none are market-moving.

 

    Fundamental

 

       Headlines

 

              The Economy

 

                        US

 

The May NY Fed manufacturing index was reported at 19.6 versus expectations of 7.5.

           

                        International

 

April YoY Japanese machine tool orders increased 45.1% versus estimates of +28.1%; April PPI was up 2.3% versus +0.7%.

                         

                        Other

                         

                          Consumers switching to ‘wait and see’ mode.

                              https://bonddad.blogspot.com/2026/05/april-retail-sales-consumers-may-be.html

 

            Overnight News

 

US President Donald Trump left China on Friday with no major breakthroughs on trade or tangible help from Beijing to end the Iran war, despite two days spent heaping praise on his host, Xi Jinping  

 

            Fiscal Policy

 

              America’s new debt milestone.

              https://lawliberty.org/americas-new-debt-milestone/?mc_cid=98c3923580

 

              Government finances are not ready for a recession (and neither are stocks).

              https://www.apollo.com/wealth/the-daily-spark/us-government-finances-are-not-ready-for-a-recession

 

              The 2026 edition of Citizens against Government Waste Pigbook.

              https://washingtonstand.com/article/2026-edition-of-citizens-against-government-wastes-pigbook-shows-congress-still-addicted-to-earmarks

 

 

            Inflation

 

              Inflation is elevated no matter how you slice it.

              https://www.carsongroup.com/insights/blog/inflations-elevated-no-matter-how-you-slice-it-in-10-charts/

 

              Inflation is coming back.

                  https://talkmarkets.com/article/inflation-is-coming-back-and-these-assets-are-about-to-explode-higher-1778778635

 

            AI

 

              AI exposes massive hidden software problem.

              https://talkmarkets.com/article/chart-of-the-week-ai-just-exposed-a-massive-hidden-software-problem-1778780112

 

            Affordability

 

              Update on new home affordability.

              https://politicalcalculations.blogspot.com/2026/05/new-homes-continue-trend-of-improving.html

 

            China

 

              The Thucydides test and why Xi raised the issue.

  https://www.bloomberg.com/news/articles/2026-05-14/what-is-the-thucydides-trap-and-why-did-xi-raise-it-with-trump?accessToken=eyJhbGciOiJIUzI1NiIsInR5cCI6IkpXVCJ9.eyJzb3VyY2UiOiJTdWJzY3JpYmVyR2lmdGVkQXJ0aWNsZSIsImlhdCI6MTc3ODc4MzAwMiwiZXhwIjoxNzc5Mzg3ODAyLCJhcnRpY2xlSWQiOiJURjBORUJUOU5KTFgwMCIsImJjb25uZWN0SWQiOiJCMzFCNTRDQTI3MTE0NjAxOUQxMURCN0IxRUM4NTE2MyJ9.Ic8sFd3ASExvDgjGZ1UZkN_hYDhhbqyzSAb25phYkc8

 

 

     Investing

 

            Four financial tasks that you shouldn’t put off.

            https://www.morningstar.com/personal-finance/4-financial-jobs-you-shouldnt-put-off

 

            The risk premium in Treasuries continues to rise.

            https://www.capitalspectator.com/treasury-premium-climbs-again-fueled-by-sticky-inflation/

 

            Advice from TraderFeed that applies as equality to investors as it does to traders:

 

In her book on how children handle loss and grief, Dr. Corinne Masur makes an important point. During a time of upheaval and loss of an anchor in life, it's important to "keep rules and routines as consistent as possible" (p. 173). Loss brings a psychological sense of instability. Grounding life in consistency helps bring stability to the difficult life period.

 

This is rarely acknowledged in trading psychology, but the same principles hold. If traders go for significant gains in markets, they will occasionally experience significant losses. Sharpe Ratios for the usual directional trading ensure that the magnitude of losses will be correlated with the magnitude of the gains.

 

As emphasized below, what motivates traders is not just money, but a dream of success. When those large losses occur, the dream is threatened. Stability is lost. How can traders deal with such upheaval? We rarely read of this challenge.

 

For the trader, as for the child, the best coping comes from doubling down on routine and the familiar processes that have brought past success. This not only brings a sense of stability but also helps prepare the trader for the eventual comeback. It is tempting to want to make the money back all at once, but such overtrading can only lead to further losses and emotional injury.

 

We often hear of the importance of remaining process driven in trading. Yes, this grounds us in our best practices, but it also grounds us emotionally when our large bets result in large losses.

 

 

    News on Stocks in Our Portfolios

 

 

 

What I am reading today

 

            The hidden mistake in every forecasting failure.

            https://www.realclearmarkets.com/articles/2026/05/14/the_same_hidden_mistake_in_every_forecasting_failure_1182544.html

 

 

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The Morning Call---Kevin Warsh has it wrong

 

The Morning Call

 

5/14/26

 

The Market

         

    Technical

 

            Wednesday in the charts.

                https://www.zerohedge.com/markets/jensen-sparks-big-tech-dip-buying-despite-volcanic-ppi-erupting-oil-bitcoin-battering

 

Summary: Despite soaring producer prices and choppy oil prices, the appearance of Jensen Huang on AF1, retail traders, and the ongoing gamma squeeze, rescued big-tech stocks after yesterday's dip (but 'real-world' stocks slipped). Yields and the dollar rose (BRL tumbled) along with oil but gold and bitcoin were dumped. Silver surged.

 

                        Wednesday 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

 

            Breadth is breaking.

            https://www.zerohedge.com/the-market-ear/spot-vol-breadth-breaking

 

Summary: The melt-up keeps getting narrower. While SPX continues grinding higher, breadth beneath the surface is quietly starting to break down in a way historically associated with much more fragile markets. Mega-cap AI and momentum names continue masking increasingly ugly internals beneath the surface, even as volatility dynamics and correlation behavior are starting to resemble some far more dangerous periods from the past. The market keeps going up. Fewer and fewer stocks are actually participating. That is usually how the most dangerous melt-ups begin to break.

 

 

There is no such thing as a bubble. I include this piece ‘for the sake of argument’. I like and agree with a lot of what John Tamny writes. However, in this article, I believe he confuses ‘there is a seller for every buyer’---which is true---with ‘there are more buyers than sellers’---which is why buyers keep hitting increasingly higher offers, taking prices to economically unjustifiable levels.

https://www.realclearmarkets.com/articles/2026/05/13/please_stop_theres_no_such_thing_as_a_bubble_1181799.html

 

            Counterpoint.

            https://www.advisorperspectives.com/commentaries/2026/05/13/parabolic-semiconductor-rally-pricing-2028

 

            Stock performance in the month following its earnings report.

            https://klementoninvesting.substack.com/p/just-do-what-you-did-last-month

 

Thursday morning setup: US futures are higher as we await color on the Trump-Xi summit and US- Iran negotiations, which are said to be ongoing, and as the tech meltup continues. What is known so far is that Trump / Xi agree that Iran cannot have a nuclear weapon, Hormuz should reopen without a toll or militarization; the countries will look to increase investment in each other as NVDA H20 chips are approved for a set of Chinese companies. In short, markets are higher on what BBG calls the 4 Ts: Tehran, Trade, Taiwan and Tariffs, to which we can also add Tech. As of 8:00am ET, S&P futures are up 0.3% while Nasdaq futures rise 0.2%. In pre-market trading, Cisco soared 16% after the company reported results that beat expectations and raised its full-year forecast as it laid off thousands to fund capex. Mag7 stocks are higher led by NVDA again; semis are mostly lower despite KOSPI adding 1.7%, while Cyclicals are seeing a bid. Cyclicals, esp Consumer Disc and Fins, would be among the biggest beneficiaries of a reopening of SoH (oil down, yield curve bull steepens, lower inflation expectations). Bond yields are flat to down 1bp, the USD is flat, and commodities are mostly lower. Energy commodities are still rallying but Metals are weaker dragged by the PGMs as Ags come for sale. Today’s macro data focus is on Retail Sales and Jobless Data. 

 

    Fundamental

 

       Headlines

 

              The Economy

 

                        US

 

                          Weekly initial jobless claims totaled 203,750 versus estimates 203,500.

 

April retail sales were up 0.5%, in line; ex autos, they were up 0.7% versus +0.6%.

                       

                        International

 

Q1 UK (preliminary) GDP growth was +0.2% versus consensus of +0.4%; Q1 (preliminary) business investment rose 0.7% versus +1.1%; Q1 YoY construction orders were down 11.9% versus +4.5%; March GDP was up 0.3% versus -0.2%; the March trade balance was -L27.3 billion versus -L20.0 billion; March industrial production declined 0.2% versus -0.3%; March YoY construction output was off 0.3% versus -2.5%.

 

                        Other

 

            Overnight News

 

Xi Jinping has told American chief executives travelling with Donald Trump that China’s door to business “will only open wider and wider” as the leaders of the world’s two biggest economies meet in Beijing.

https://www.zerohedge.com/geopolitical/trump-xi-put-hormuz-iran-trade-taiwan-center-historic-beijing-summit

 

Beijing granted permission on Thursday for hundreds of American slaughterhouses to resume beef shipments to China, 15 months after Chinese officials had signaled displeasure with President Trump’s initial tariffs by allowing the industrial facilities’ licenses to expire.

 

Chinese leader Xi Jinping warned President Trump that any mishandling of Taiwan could lead to “an extremely dangerous situation,” directly raising a point of tension that has loomed over the meeting. Xi’s statement, while in line with China’s longstanding position, threatened to dim the mood of a visit both countries hoped would stabilize ties.

 

            Iran

 

              Overnight news.

 

US President Trump's team is now discussing options for military escalation to break the deadlock, Axios reported. US officials don't expect Trump to take any dramatic steps during his trip but think he could make his next move immediately afterward. One option is to resume "Project Freedom," while another is to launch a new bombing campaign focusing on Iranian infrastructure.

 

Pakistan Foreign Ministry said the peace process is intact, its holding on, we remain engaged and hopeful, Journalist Mallick reported.

 

Iranian Foreign Minister Araghchi said although Iranian forces are ready to "deliver a crushing and devastating response to foreign aggressors, we do not seek war."

 

              Oil inventories falling a record pace.

              https://www.bloomberg.com/news/articles/2026-05-13/oil-inventories-fall-at-record-pace-on-iran-war-shock-iea-says?srnd=homepage-americas&sref=loFkkPMQ

 

Summary: Oil inventories are falling around the world at a record pace and will continue to drop for months as the disruption to Middle East supplies from the Iran war intensifies. The market will remain “severely undersupplied” until October even if the conflict ends next month, according to the International Energy Agency. The crisis is taking a toll on demand, prompting the agency to slash projections for a third month since the conflict began, with world oil consumption set to plunge by 2.45 million barrels a day this quarter.

 

              No end in sight.

              https://www.capitalspectator.com/us-iran-crisis-edges-toward-prolonged-stalemate/

 

            Monetary Policy

 

              Kevin Warsh has it wrong. I can’t believe that I am agreeing with Janet Yellen.

              https://www.nytimes.com/2026/05/12/opinion/kevin-warsh-fed-ai.html?unlocked_article_code=1.iFA.eak-.PLVAlHhnXsHj&smid=url-share

 

            Inflation

           

              April real hourly wages.

              https://econbrowser.com/archives/2026/05/real-hourly-wages-for-april

 

              April grocery prices.

              https://econbrowser.com/archives/2026/05/grocery-prices-and-forecasts

 

              Nowcast for everyday prices.

              https://econbrowser.com/archives/2026/05/price-levels-relative-to-january-2025

 

              In depth look at yesterday’s PPI number.

              https://wolfstreet.com/2026/05/13/producer-price-inflation-explodes-as-the-services-ppi-blows-out-on-top-of-the-energy-price-spike/

 

The Financial System

 

              The credit markets are getting better, not worse.

              https://www.apollo.com/wealth/the-daily-spark/in-credit-markets-things-are-getting-better-not-worse

 

The problem isn’t private credit, it’s concentration. This is such bulls**t. Few disagree with the principle of diversification. Nowhere in the article does the author address the rampant markdowns of assets within private credit funds due to performance failure.

https://giftarticle.ft.com/giftarticle/actions/redeem/e651d46c-ba93-48e1-ad0d-adbc73cec33c

 

            China

 

              How China could use its control over rare earths against the US.

              https://www.nytimes.com/2026/05/13/business/china-trump-xi-rare-earths.html?unlocked_article_code=1.iFA.HfNu.rsSEbvzVm_Zx&smid=url-share

 

     Investing

 

              Morgan Stanley ups S&P target to 8300.

  https://www.bloomberg.com/news/articles/2026-05-13/morgan-stanley-hikes-s-p-500-target-to-8-300-on-earnings-boom?srnd=homepage-americas&sref=loFkkPMQ

 

                          JP Morgan breaks down bull case.

                 https://www.zerohedge.com/markets/fear-not-or-yolo-ai-shorts-jpmorgan-traders-break-down-bullbear-case-here

 

 Summary: A reminder to all that keep telling me that the market cannot hold with WTI above $100/bbl...For 3.5 of Obama’s 8 years in office, oil was $100+ and the SPX tripled, and we had 118 record closes. This was prior to the shale revolution when we were 'running out of oil'......fear not." Overall, the Market Intel desk thinks the bull case holds until there is a change in fundamentals or an extreme change in positioning, Risks to our view are (a) a resumption of the kinetic portion of the Middle East Conflict; (b) a spike in bond yields / bond vol; (c) a material reversal in the Tech trade.

 

             A retirement check list.

             https://www.usatoday.com/story/money/personalfinance/retirement/2026/05/11/retirement-checklist-final-years/89907837007/

 

    News on Stocks in Our Portfolios

 

 

 

What I am reading today

 

            The rules for getting rich change with every era.

                https://www.fastcompany.com/91536443/how-the-rules-of-getting-rich-in-america-change-every-era

 

            The map is closing around China.

                        https://www.rodmartin.org/p/the-map-is-closing-around-china?utm_source=post-email-title&publication_id=2471308&post_id=196488097&utm_campaign=email-post-title&isFreemail=false&r=9bg2k&triedRedirect=true&utm_medium=email

 

            Was Alexander the Great really poisoned?

            Was Alexander the Great really poisoned? Science sheds new light on an age-old question. | National Geographic

 

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