The Morning Call
5/19/26
The
Market
Technical
Monday in the
charts.
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.
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.
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,
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.
China
Chinese espionage steals $600 billion annually
from US.
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.
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.
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.
Global
bond yields at highs based on inflationary fears.
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.
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