Tuesday, May 19, 2026

The Morning Call--Bond yields, Fed policy and stock prices

 

The Morning Call

 

5/19/26

 

The Market

         

    Technical

 

            Monday in the charts.

            https://www.zerohedge.com/markets/renewed-iran-headline-roulette-triggers-market-mayhem-bitcoin-battered

 

Summary: With OpEx behind us (and NVDA EPS ahead), it appears Friday's stall in the AI/Semis surge has reignited the 'oil matters' (and so do rates) cognition. The return of headline roulette left oil higher, stocks (Momo, AI, Semis) and crypto lower. The dollar declined along with bond prices (yields up modestly) with gold and silver flat on the day. An hour before the close, Trump tweeted that he has "called off a planned strike on Iran tomorrow" sparking optimism for a deal, sending oil down and stocks up.As one cynical old market trader remarked to us "sooooo stocks ramp because attacks which they had no idea about 20 minutes ago.. aren't going to happen..."

 

            Monday 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 most crowded trade on earth is cracking.

            https://www.zerohedge.com/the-market-ear/most-crowded-trade-earth-cracking

 

Summary: The problem with melt-ups fueled by leverage, short gamma and retail chasing is that the same flows that powered the vertical squeeze higher can quickly accelerate downside once momentum finally cracks.

 

Tuesday morning setup: US equity futures are lower, set for a 3rd drop in a row, as traders waited for futile signs of progress toward a peace deal in the Middle East. and as tech and small cap stocks reacted adversely to higher bond yields around the globe, but nowhere more so than in Japan, where many tenors are trading at record lows, as the wheels have fully come off the clown bus, aka the Bank of Japan. As of 7:30am ET, Nasdaq 100 futures slid 0.8% as a retreat in tech shares pulled stocks lower in the US and Asia; S&P futures were down 0.4%, putting the benchmark on course for its longest losing streak since March. In premarket trading, semis/memory names remain under pressure; GOOGL and MSFT outperformed their Mag 7 peers, with Nvidia’s earnings looming as the next major test for the AI trade. Sandisk slipped again as the selloff in memory stocks continued. Financials and Staples are two of the bright spots despite Defensives generally leading Cyclicals. South Korea’s Kospi - ground zero of the global memory momentum bubble - led losses in Asia as the momentum trade cracks (with foreign investors pulling money for a 9th straight day). Europe’s Stoxx 600 rose 0.7% as media and financial services outperformed: the continent's outperformance may be the market expressing the view that the next rotation is underway. The USD traded near session highs, reversing a modest drop earlier, which helped send 10Y yields to session highs around 4.62%. Oil reversed overnight losses to trade at session highs while. Commodities are mixed after Trump said he is delaying Iranian attacks due to GCC requests to find a deal. Today’s macro data focus is on weekly ADP and Pending Home Sales. Given bond yields, the Goldilocks zone for ADP has narrowed: too high and inflation concerns flare and too low and the narrative shifts to stagflation.

 

    Fundamental

 

 

       Headlines

 

              The Economy

 

                        US

 

                          The May housing index came in at 37 versus estimates of 35.

                          https://www.advisorperspectives.com/dshort/updates/2026/05/18/nahb-housing-market-index-builder-confidence-may-2026

 

 

                        International

 

Q1 preliminary QoQ Japanese GDP growth was 0.3% versus expectations of +0.4%; Q1 preliminary QoQ capital expenditures were up 0.3% versus +0.2%; Q1 QoQ private consumption was up 0.3% versus +0.2%; the Q1 YoY price index was +3.4% versus +3.1%; March industrial production fell 0.4% versus -0.5%.

 

The March UK unemployment rate was 5.0% versus forecasts of 4.4%; March 3 month YoY average earnings were up 4.1% versus +3.8%; Q1 QoQ labor productivity was up 0.9% versus -0.3%.

 

                          From yesterday:

 

April YoY Chinese industrial production grew 4.1% versus predictions of +5.9%; April YoY retail sales were up 0.2% versus +2.0%; April YoY fixed asset investment was down 1.6% versus +1.6%; the April unemployment rate was 5.2% versus 5.3%.

 

                        Other

 

            Iran

 

              Overnight news such as it is.

              https://www.zerohedge.com/energy/oil-slides-iran-says-us-agreed-lift-oil-sanctions-during-negotiation-period

 

            Monetary Policy

 

The argument for a dovish Fed policy. In my opinion, the major flaw in the author’s argument is inferring that the futures market pricing of inflation/rate hikes is somehow inferior to the opinions of the author’s self-appointed ‘experts’. History suggests that the forecasts of economic experts are anything but accurate,

https://www.realclearmarkets.com/articles/2026/05/18/misread_signals_the_1970s_inflation_bogeyman_isnt_back_1183084.html

 

              And why the bond market disagrees.

              https://www.apollo.com/wealth/the-daily-spark/g7-government-bond-yields-at-highest-level-since-2004

           

              As inflation heats up, the bond market is losing its cool.

              https://www.capitalspectator.com/as-inflation-heats-up-the-bond-market-loses-its-cool/

           

              John Mauldin presents both sides of the argument.

              https://www.advisorperspectives.com/commentaries/2026/05/18/shootout-inflation-corral

 

            Inflation

 

              It is not just about higher oil prices.

              https://wolfstreet.com/2026/05/18/food-inflation-in-america-by-product-it-boils-down-to-a-sharp-re-acceleration-on-top-of-already-very-high-prices/

                                                 

 

            China

 

              Chinese espionage steals $600 billion annually from US.

              https://www.foxnews.com/opinion/chinese-espionage-steals-600-billion-us-firms-yearly-time-government-act

 

     Investing

 

            The stock market winning streak is about to be tested.

            https://www.nytimes.com/2026/05/15/business/stocks-bonds-interest-rates-inflation.html

 

            What is driving the stock market boom (bubble)?

            https://bonddad.blogspot.com/2026/05/whats-driving-stock-market-boom-or.html

 

            Unsustainable things rarely sustain.

            https://www.downtownjoshbrown.com/p/unsustainable-things-rarely-sustain

 

            Lance Roberts tries to walk a tight rope.       

            https://www.advisorperspectives.com/commentaries/2026/05/18/stagflation-narrative-what-doomers-wrong-part

 

            Four abilities every investor needs.

            https://awealthofcommonsense.com/2026/05/the-4-abilities-every-investors-needs-to-be-successful/

 

                Don’t be somebody else’s exit liquidity.

            https://trendlabs.com/exit-liquidity/

 

                Inflation uptick sending sell signals to stockholders.

            https://www.bloomberg.com/news/articles/2026-05-18/inflation-uptick-is-starting-to-send-sell-signals-to-stock-bulls?srnd=homepage-americas&sref=loFkkPMQ

 

Summary: Wall Street strategists are warning that the honeymoon period for stocks is over and a harsh macro-economic reality threatens this year's rally. Investors' focus is flipping back to challenges including oil prices above $100 a barrel and hot consumer- and producer-price readings that have traders pricing in potential interest rate hikes. Strategists see macro developments having a greater influence on the market's direction in the coming months, with some warning of a significant pullback in equities and a "post-earnings hangover".

 

                        With inflation uptick comes higher bond yields which impact the momentum trade.

            https://sherwood.news/markets/how-surging-bond-yields-threaten-to-derail-the-momentum-trade-in-stocks/

 

            Global bond yields at highs based on inflationary fears.

https://www.bloomberg.com/news/articles/2026-05-17/japan-10-year-yield-jumps-on-global-inflation-angst-as-oil-rises?srnd=homepage-americas&sref=loFkkPMQ

 

Summary: Global bond yields hovered near multiyear highs as rising energy prices stoked inflation concerns. Yields on 30-year US bonds have risen above 5% and the rate on similar-maturity German debt was the loftiest in 15 years. Japanese government bonds notched the biggest losses, with the 30-year yield surging to its highest since the maturity was first sold in 1999.

 

                Broadline retail is growing while household durables are lagging.

                        https://talkmarkets.com/article/q1-2026-us-retail-preview-broadline-retail-powers-earnings-growth-as-household-durables-weaken-1779132206

 

    News on Stocks in Our Portfolios

 

 

 

What I am reading today

 

           

 

 

Visit Investing for Survival’s website (http://investingforsurvival.com/home) to learn more about our Investment Strategy, Prices Disciplines and Subscriber Service.

 

 

 

Monday, May 18, 2026

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

 

           

 

Visit Investing for Survival’s website (http://investingforsurvival.com/home) to learn more about our Investment Strategy, Prices Disciplines and Subscriber Service.

 

 

 

Friday, May 15, 2026

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

 

 

Visit Investing for Survival’s website (http://investingforsurvival.com/home) to learn more about our Investment Strategy, Prices Disciplines and Subscriber Service.