The Morning Call--The easy part of the bounce is over

 

The Morning Call

 

4/2/26

 

The Market

         

    Technical

 

            Wednesday in the charts.

            https://www.zerohedge.com/markets/whos-fool-trump-talk-kicks-april-stocks-gold-crypto-higher

 

Summary: New month, new quarter yet same hyperbolic back-and-forth between Trump and Iran ahead of a potential ceasefire (and tonight's must-watch Trump Address) may leave a lot of people feeling like a fool. Oil was lower overall but not aggressively so. Stocks relished the hope of a ceasefire (led by big-tech), but activity was low, bonds chopped sideways. A weaker dollar supported bullion, but bitcoin gave up its early gains.

 

Note: despite another positive day in stock land, the S&P (1) traded to the upper boundary of that trend of lower highs and retreated, (2) failed to close above the last lower high and (3) did so on unimpressive breadth and volume. In addition, the 50 DMA fell below the 100 DMA. Keep your powder dry until there is a break of the current downtrend.

 

            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

 

From TraderFeed: ‘So, for instance, yesterday we had a nearly 3% jump in SPY. That is unusual; there have only been 49 occasions out of around 4000 since 2010 when a similar rise has occurred. The average return over the next five days has been negative, but quite positive over the next 30 trading days. Perhaps more important, the next five day volatility has been over twice as high following the big jump compared with the rest of the market sample.’ 

 

            Massive short squeeze fogs market’s view of peace prospects.

            https://www.bloomberg.com/news/articles/2026-04-01/wall-street-traders-say-positioning-not-peace-is-driving-stocks?srnd=homepage-americas&sref=loFkkPMQ

 

            The easy part of the bounce is over.

            https://www.zerohedge.com/the-market-ear/easy-part-bounce-over-now-comes-hard-part

 

XLE from overbought to support.

            https://www.zerohedge.com/the-market-ear/overbought-support-3-days-xle-just-reset

 

    Fundamental

 

       Headlines

 

              The Economy

 

                        US

 

Weekly initial jobless claims totaled 202,000 versus consensus of 212,000.

 

The February trade balance was -$57.3 billion versus expectations of -$59.2 billion.

 

The March manufacturing PMI was reported at 52.3 versus estimates of 52.4.

https://www.advisorperspectives.com/dshort/updates/2026/04/01/sp-global-manufacturing-pmi-march-2026

 

The March ISM manufacturing index was 52.7 versus projections of 52.5.

https://bonddad.blogspot.com/2026/04/march-ism-manufacturing-shows-expansion.html

 

                        International

 

                        Other

 

                          February median household income.

                          https://politicalcalculations.blogspot.com/2026/04/median-household-income-in-february-2026.html

 

                          The latest March CPI nowcast.

                          https://econbrowser.com/archives/2026/03/anticipating-april-10-march-cpi-release

 

                          Four factors that will determine the direction of the economy.

                          https://www.wsj.com/economy/economic-tail-risks-in-2026-65187567?mod=economy_lead_story

 

                          Huge physical disconnect in the energy market.

                          https://www.zerohedge.com/commodities/there-huge-physical-disconnect-energy-markets

 

Summary: Specialist clients increasingly believe (1) a higher floor is being set across several commodity markets given destocking and infrastructure damage and (2) commodities can trade materially higher with no further escalation as the current imbalance can create acute tightness. 

 

            Thursday Morning Setup

 

Global risk assets, including US equity futures and global markets, as well as Treasuries and precious metals, tumbled as oil soared with Brent hitting $110 this morning after Trump's late Wednesday speech refused to pivot and dashed hopes that the Hormuz Strait would reopen soon and the war in the Middle East is nearing a swift resolution. As of 8:00am ET, S&P 500 futures dropped 1.7%, reversing yesterday's short squeeze as investors refuse to add to risk positions ahead of the long weekend when many speculate a ground invasion of Iran may begin. Nasdaq 100 contracts slumped 2% amid a premarket selloff in big tech stocks and chipmakers. Tech is getting hit hard with Mag7 and Semis lagging while Cyclicals ex-Energy are underperforming Defensives with both Staples and Healthcare down in absolute terms pointing to broad-based de-risking into the holiday weekend. Energy should have a good day as investors re-gross in the sector and Integrateds are trading up ~3% pre-mkt. Brent soared 8.2% to more than $109 a barrel after Trump pledged more aggressive action against Iran and offered no concrete plans to reopen the Strait of Hormuz. European diesel futures hit $200 a barrel. Bonds tumbled as expectations that oil prices will stay higher for longer prompted traders to initiate fresh bets on tighter monetary policy. The dollar advanced the most in a week while gold snapped a four-day streak of gains. US economic data calendar includes March Challenger job cuts (7:30am New York time), February trade balance and weekly jobless claims (8:30am). Fed speaker slate includes Logan (10:15am) and Bowman (12:45pm)

 

            Iran

 

              Dimon says that it is vital to successfully complete Iran war.

  https://www.bloomberg.com/news/articles/2026-04-01/dimon-says-vital-us-ensures-iran-war-is-successfully-completed?srnd=homepage-americas&sref=loFkkPMQ

 

  Summary: “We’ve got to finish this thing and finish it right.” Anything less will likely leave markets and the world economy vulnerable to   shocks.

 

                          Gulf allies privately encouraging Trump to decisively defeat Iran.

              https://apnews.com/article/trump-iran-saudi-arabia-mbs-gulf-war-uae-89f690b952fe28d3140c537b70fa5051

 

            Monetary Policy

 

              Are fiat currencies in a death spiral? This analyst thinks not.

              https://www.advisorperspectives.com/commentaries/2026/04/01/rubino-fiat-currencies-death-spiral

 

            Inflation

 

              Disappointing plantings, higher fertilizer prices add to global food inflation.

              https://www.zerohedge.com/commodities/disappointing-us-plantings-exploding-urea-prices-fertilizer-squeeze-add-fuel-global

 

Summary: granular urea spot, the benchmark cash price for granular urea at New Orleans and the lower Mississippi River market, has nearly doubled this year to almost $700 per short ton. For context, urea is one of the world's most important nitrogen fertilizers. Adding to the surging fertilizer prices and mounting global supply concerns, the latest U.S. Department of Agriculture data showed that American farmers plan to plant fewer acres this year than previously expected.

 

     Investing

 

            Five red flags that almost always lead to disaster.

            https://www.riskhedge.com/outplacement/the-5-red-flags-that-almost-always-lead-to-disaster

 

            Betting on war is dangerous.

            https://spencerjakab.substack.com/p/loaded-dice-will-blow-up-in-our-faces

 

            Reasons to be bullish on gold.

            https://www.ft.com/content/daf29b16-5f97-42af-b7c0-8e9ca78c8e95?syn-25a6b1a6=1

           

Summary: So, what is the gold price telling us? First, markets remain uncertain on the duration of the conflict, driving a continued need for liquidity. Evidence of this is shown in how the implied volatility in gold markets has jumped to levels last seen during the pandemic. Gold also appears to have now reverted to taking its short-term cues from US rate expectations and uncertainty around the policy response to the current crisis.

 

The state of the ETF market. I didn’t find most of the article particularly interesting. However, if you invest in ETFs, you need to read the section entitled Trust Decay.

            https://www.etf.com/sections/etf-analytics/q1-26-state-bonkers-etf-market

 

    News on Stocks in Our Portfolios

 

 

What I am reading today

 

           

 

 

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The Morning Call--Too soon to get jiggy

 

The Morning Call

 

4/1/26

 

The Market

         

    Technical

 

            Tuesday in the charts.

                        https://www.zerohedge.com/markets/saaspocalypse-wow-apocalypse-now-q1-chaos-comes-end-oil-most-covid-gold-worst-lehman

 

Summary: Tl;dr: Q1 was already hectic, led by AI disruptions, a private credit crisis, and precious metals panic, and then came Iran in March. Volatility is up dramatically in every asset-class with software's slaughter wrecking tech, dominating equity weakness. A violent hawkish shift in market expectations pushed rates higher in March as war sent oil higher and gold lower. Bitcoin outperformed as the dollar was aggressively bid. The month ended on a positive tone (stocks up, oil down) with 'off-ramp' signals from Trump and Iran.

'...we love the smell of off-ramps in the morning...'

 

Note: the explosive pin action notwithstanding, the S&P remains in a downtrend and will remain so until it breaks above its last lower higher and its 200 DMA---both converging on ~6625. However, have your Buy List ready.

 

Tuesday 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 Wednesday morning opening setup: Futures and bonds jump and oil fell, sending Brent briefly below $100 a barrel, as the de-escalation/technical/macro led relief rally continues on hopes of the Middle East conflict reaching an end soon  after Donald Trump said he expects the war in Iran to end in two to three weeks, and indicated that it was possible that Iran could still reach a deal with the US during that timeframe. Trump has a national address tonight at 9pm ET to discuss Iran, but the content is unclear, with the market is expressing the view that this will be details on a wind-down rather than an escalation. As of 8:15am ET, S&P Futures were 0.7% higher, after the cash index posted a near 3% advance on Tuesday, the best end to a quarter since September 2008. Nasdaq futures jumped 1.1% with all Mag 7 names higher premarket. European stocks jumped 2.6%, alongside a 4.9% surge in Asian shares. Final Mfg PMIs from the Europe were mixed (EU, Germany, Italy small beats/UK, France small missed) while Japan/Korea Manf PMIs were slightly better. Trump is set to address the nation tonight at 9pm EST and said he expects the war to end in two to three weeks/US would withdraw once Tehran can no longer obtain nuclear weapons. Otherwise, the US is sending a third aircraft carrier to the region, Iran said the US “isn’t serious about diplomacy”, the WSJ reported that the UAE wants to force the Strait of Hormuz open and is willing to join the fight, and attacks continued on both sides with Qatar saying Iran struck an oil tanker. Brent fell 5.4% before paring the move as the Strait of Hormuz remained largely closed and attacks continued across the Gulf. Traders trimmed bets on tighter monetary policy, sending two-year Treasury yields three basis points lower to 3.76%.

 

                The longest oversold streak since 2008.

            https://talkmarkets.com/article/a-record-scratch-in-the-market-1774982549

 

            Relief rally ends correction.

            Relief Rally Ends Correction Risk

 

Summary: If Trump is declaring mission accomplished, then so are we regarding our stock market correction call. We will probably lower our recession odds from 35% back to 20% once we have a better handle on whether the conflict in the Persian Gulf is actually over. We reserve the right to change our minds as often as the President does. Nevertheless, we have maintained our 7700 S&P 500 year-end target and our commitment to our Roaring 2020s base case.

 

                        This is nothing more than a technically oversold rally.

            https://www.zerohedge.com/markets/jpm-desk-nothing-more-oversold-tactical-bounce

 

Summary: while these were de-escalation developments, the content of the headlines was not new, particularly given that the Iran headline was the same reiteration of its demand. Instead what happened is what we warned would happen 24 hours ago: positioning was so bearish - take CTAs for example which as we noted had sold $184 billion in global stocks in the last month and were net short $47 billion in stocks - that any "good news would guarantee a rip higher."

 

            Gold’s correction is technical not fundamental.

            https://www.advisorperspectives.com/commentaries/2026/03/31/golds-correction-technical-not-fundamental

 

    Fundamental

 

       Headlines

 

              The Economy

 

                        US

 

Weekly mortgage applications dropped 10.4% while purchase applications were down 3.0%.

 

  Month to date retail chain store sales were up 6.9% versus   +6.7% in the prior week.

 

 The January Case Shiller home price index fell 01% versus forecasts of -0.2%.

                          https://www.advisorperspectives.com/dshort/updates/2026/03/31/s-p-cotality-case-shiller-index-home-prices-up-for-sixth-straight-month

 

February job openings (JOLTS) totaled 6.88 million versus predictions of 6.92 million.

https://www.advisorperspectives.com/dshort/updates/2026/03/31/jolts-report-job-openings-february-2026

 

February retail sales rose 0.6% versus consensus of +0.5%; ex autos, they were up 0.5% versus +0.3%.

https://www.zerohedge.com/personal-finance/us-retail-sales-jumped-most-8-months-february

 

The March ADP employment report showed job growth of 62,000 versus expectations of 40,000.

https://www.zerohedge.com/markets/adp-employment-reports-shows-better-expected-job-gains-accelerating-wages

 

The March Chicago PMI came in at 52.8 versus estimates of 55.0.

https://www.advisorperspectives.com/dshort/updates/2026/03/31/chicago-pmi-expands-for-third-straight-month

 

The March consumer confidence index was 91.8 versus projections of 88.0.                      

                           https://www.advisorperspectives.com/dshort/updates/2026/03/31/consumer-confidence-inched-up-again-in-march

 

                        International

 

The Q1 Japanese large manufacturers index was reported at 17 versus forecasts of 16; the large nonmanufacturers index was 36 versus 33; the small manufacturers index was 7, in line.

 

The February EU unemployment rate was 6.2% versus predictions of 6.1%.

 

The March Japanese manufacturing PMI was 51.6 versus consensus of 51.4; the March Chinese manufacturing PMI was 50.8 versus 51.6; the March German manufacturing PMI was 52.2 versus 51.7; the March EU manufacturing PMI as 51.6 versus 51.4; the March UK manufacturing PMI was 51.0 versus 51.4.

 

                        Other

 

                          War. What is it good for?

                          https://alhambrapartners.com/weekly-market-pulse-war-what-is-it-good-for/?src=news

 

            Iran

 

              Overnight news.

                          https://www.zerohedge.com/geopolitical/uae-poised-join-anti-iran-operations-trump-rips-nato-paper-tiger-says-exit-beyond

 

 

            Fiscal Policy

 

              Washington ignores the US’s fiscal cliff.

              https://www.axios.com/2026/03/22/washington-ignores-americas-fiscal-cliff

 

              The $39 trillion debt bomb.

              https://www.foxnews.com/opinion/americas-39-trillion-debt-bomb-could-be-more-painful-than-you-think

 

              Counterpoint.

              https://www.realclearmarkets.com/articles/2026/03/31/a_50_trillion_national_debt_in_2030_will_signal_opposite_of_debt_problem_1173207.html

 

All the authors agree that the US government spending is wasteful and growing; the difference is that the former believes that it is a problem that will only become worse, the latter that it will become a problem when the Market determines that it is a problem---although he skips over what may be its current impact on inflation and the dollar (see below).

 

            Inflation

 

              A new framework for the neutral rate warns of inflation.

             https://www.zerohedge.com/markets/new-framework-neutral-rate-warns-inflation

 

Summary: While the nominal neutral gap (the difference between the 10y1m OIS rate and the terminal rate) has fallen, the real neutral gap, deflating the rates by the 10-year and shorter-dated inflation swaps respectively, is widening. In real terms then, the Fed is expected to get further below the neutral rate. Intuitively, that points to a fanning of inflation pressures; that’s the case empirically as well, with rises in the gap often preceding rises in price growth by about 3-6 months.

 

 

            Recession

 

              From inflation shock to demand destruction.

              https://www.zerohedge.com/markets/inflation-shock-demand-destruction-follow-troops-not-tweets

 

Summary: The worst outcome for central bankers right now would be a significant rise in survey-based inflation expectations in the face of weaker growth dynamics. Thus far, the reaction we have seen is how you’d expect any central banker to respond – respect the fact that conditions have changed and stand ready and willing to fight any sustained move higher in core inflation. Front-end policy rate expectations have responded in kind, pricing in almost 3 rate hikes from the ECB and BOE by year-end and no further cuts from the Fed. But the hit to growth muddies this picture – damage to risk appetite, the feedback loop from tightening financial conditions and the non-linearity associated with a prolonged move higher in energy prices means that aggressively tightening monetary policy may exacerbate financial stress in the economy, with highly uncertain second round effects. In sum, I expect demand destruction to happen in both scenarios should this war continue for much longer…either from central banks that are forced to hike rates assertively to challenge spiraling inflation expectations…or from a large hit to growth from a persistent energy price shock.

There is only one circuit breaker to this crisis: rapid de-escalation.

 

 

            The Financial System

 

              Private lenders delay reckoning with payment concessions.

              https://www.reuters.com/business/finance/private-lenders-delay-reckoning-with-payment-concessions-stressed-debt-2026-03-31/

 

            The Dollar

 

              The dollar is dying in real time.

              https://talkmarkets.com/article/the-dollar-is-dying-in-real-time-in-3-charts-1774981231

 

     Investing

 

            How the stock market performs after a correction.

            https://awealthofcommonsense.com/2026/03/how-the-stock-market-performs-after-a-correction/

 

            Are investors too complacent?

            https://www.morningstar.com/markets/markets-brief-are-markets-too-complacent

 

            The bond market is starting to push back against Powell’s benign inflation views.

            https://www.capitalspectator.com/bond-market-starting-to-push-back-on-powells-inflation-view/

 

 

    News on Stocks in Our Portfolios

 

 

 

What I am reading today

 

            Doubting the forecast.

            https://humbledollar.com/2026/03/doubt-the-forecast/

 

            Quote of the day.

            https://cafehayek.com/2026/03/quotation-of-the-day-5332.html

 

 

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