The Morning Call
5/12/26
The
Market
Technical
Monday in the
charts.
https://www.zerohedge.com/markets/oil-stocks-gold-bitcoin-iran-peace-deal-hopes-plunge
Summary:
Stocks decoupled from the angst in the Middle East
(fragile ceasefire, mulling military action) once again today with a big
short-squeeze lifting Small Caps (not tech-led today) as oil
prices and bond yields rose in sync (along with VIX). Gold, Silver,
and Crypto were also higher as the dollar drifted lower from overnight highs. “An
agreement remains elusive and risks remain elevated,” said Mark
Haefele at UBS Chief Investment Office. “Both sides remain under pressure to
conclude a deal.” It's not going according to plan for Trump...
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 Market remains
in a feeding frenzy.
Summary:
Call skew has gone vertical. CTA is fully long. Vol control is still
mechanically supportive, though given we keep realizing volatility to the
upside it’s unclear how much incremental buying they’ll actually contribute.We
live in a structurally higher volatility market now…and I think one where
owning gamma will continue to pay. Underneath the surface you are still
seeing signs of fracture in the consumer and breadth is basically back
toward the lows again. Let’s hope memory prices keep going up…because the
energy situation still feels very far from resolved.
Options extremes
mean increasing fragility.
Summary:
when dealer gamma and skew become this extreme, markets can also become more
fragile than they initially appear because so much stability is
already embedded in positioning. The market has gone from pricing fragility
to pricing durability in an exceptionally short period of time – and the
options market is reinforcing that shift almost daily through long
gamma positioning and historically complacent skew levels. That does not
necessarily mean the rally ends here, but it probably does mean downside
hedges are materially cheaper than the broader macro narrative currently
implies.
Self-fulfilling
surge is stocks is nearing a breaking point.
https://www.zerohedge.com/markets/self-fulfilling-surge-stocks-nearing-breaking-point
Summary:
The melt-up phase of the stock market is in full swing, driven by flows and
headlines. At the same time, the intensity of the ascent brings a
potential sharp reversal closer. “The simple, winning investment strategy
has been ‘long AI, short macro.’ It’s clearly not that simple, but spring is
here, and optimism is in the air, with all the usual anxieties that things
could go wrong,” says Chris Iggo, chair of the Investment
Institute and CIO for AXA IM Core, BNP Paribas Asset Management. “We must
remain sensitive to worst-case-outcomes – more expected disruption to energy
flows, higher prices, non-linear macro effects if supply is significantly
impacted,” Iggo says. “Stagflation, as a narrative, sits alongside debt
unsustainability, excessive equity valuations, and the demise of fiat
currencies as cataclysmic ‘might happen’ outcomes.”
Tech valuations approaching
nosebleed levels.
https://talkmarkets.com/article/documenting-the-rally-1778520185
The melt up.
https://awealthofcommonsense.com/2026/05/the-melt-up-2/
Fundamental
Headlines
The
Economy
US
The April small business
optimism index was 95.9 versus predictions of 96.1.
April existing home sales
rose 0.2% versus consensus of +2.1%.
https://bonddad.blogspot.com/2026/05/existing-home-sales-prices-and.html
April CPI was up 0.6%, in line; core CPI was
up 0.4% versus +0.3%.
https://www.zerohedge.com/personal-finance/us-consumer-prices-are-rising-their-fastest-3-years
International
March
Japanese household spending fell 1.3% versus estimates of +0.6%; the March preliminary
lading economic indicators index was 114.5 versus 114.6.
The April German
CPI was +0.6%, in line.
The May EU
economic sentiment index was -9.1 versus expectations of -20.0; the May German
economic sentiment index was -10.2 versus -19.3; the May German current
conditions index was -77.8 versus -77.5.
Other
Latest Q2 GDP nowcast.
https://www.capitalspectator.com/nowcast-points-to-steady-us-growth-in-q2/
Hassett versus reality.
Iran
The US’s biggest miscalculation on Iran.
https://talkmarkets.com/article/the-uss-biggest-miscalculation-on-iran-1778273623
China
China locked and loaded for a fight with
Trump.
The
Financial System
KKR invests $300 million in struggling private
credit fund.
The Milken Conference---blissful ignorance.
Investing
The S&P is no
longer a diversified index.
Stable jobs + hot inflation + no rate hikes
= bullish stocks.
https://www.carsongroup.com/insights/blog/stable-jobs-hot-inflation-no-hikes-bullish-equities/
The argument
against a commodity super cycle.
https://www.advisorperspectives.com/commentaries/2026/05/11/commodity-supercycle-enemy-bull-thesis
Counterpoint.
An important
factor in dividend growth investing.
https://www.advisorperspectives.com/commentaries/2026/05/11/billionaires-know-investing
Why free cash flow is better than earnings.
https://talkmarkets.com/article/why-free-cash-flow-is-better-than-earnings-1778521490
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