$2.6 billion to buy market on close.
Stocks at day's highs.
From bottom to top, a 70 handle recovery in the S&P Index.

Today's reversal was quite remarkable - with a near six handle reversal from the morning's lows.
At 3:40 pm stocks within a hair of the day's highs.
I did a lot of buying and covered my remaining shorts early in the day on the "woosh" lower.
Thanks for reading my Diary and enjoy the evening.
Be safe.

Early morning selling broke support, leading to the cascade follow-up selling that was feared. That turned into an oversold condition. The turn was aided by the banks and financials on assumption that there may be some consolidation take over buying and also looks to be a possible Boeing contract aiding a wounded warrior.

Dow back in plus territory but it's all been technicals. Hold your breathe.

Stay safe.

Arthur

* Most admire Disney's remarkable business franchise
* I do, too, but I have always really admired Disney's financial acumen

I took a deep dive into the (DIS) debt deal.

$1 billion plus raised at about 1% after tax cost. Plus they cut the dividend to maintain liquidity.

As usual, Disney's financial department are the smartest guys in the room (from a capital allocation standpoint).

I reestablished my DIS investment long at $99.90 this morning. The shares are trading at over $105 now.

Opinions are like butts, everyone has one.
The transom of FinTwit, FinBlog and Fin TV are littered with market beliefs and views - many of which are non-rigorous in construction.
So, remember my pledge to all of you ...
Less pontification and more trading and investing ideas!
Though there is no guarantee to success (for sure!), my trading and investing ideas will hopefully be backed by hard hitting and often contrarian analysis - guided by logic of argument and common sense.
Many more as you can witness in my Diary today.

Out of Apple (AAPL) short now.
I have no shorts.

An outside day to the upside - a powerful signpost.

I made an unusual amount of buys this morning - in new and old names.

The S&P Index is now about 50 handles above its morning lows.

I am getting longer.

Some slow and steady breadth improvement - now only 2-1 negative.

Will the S&P have pin risk at 2800 on this afternoon's expiration?

Apple (AAPL) short reduced to small.

* I see bank stocks as representing a 'generational buying opportunity'

"Don't sell yourself short Judge, you're a tremendous slouch."
- Ty Webb, Caddyshack

My exposure to the bank stocks is very large - both in relative and absolute terms - as I see a "generational buying opportunity" in the sector. 

I recently presented my bullish bank thesis in long form several weeks ago in my Diary. 

To state the obvious (as Ty Webb did to Judge Smails in the above Caddyshack quote) the markets have not paid attention to my analysis.

In 2008, the banking industry was essentially bankrupt and somehow they are now priced lower against earnings power, tangible book value, or as percent of deposits relative to the condition that existed 12 years ago. 

Meanwhile, numerous other equities in the S&P are priced in such a discordant fashion to the high side -- that is how the relative valuation of the financials has fallen to the pits. 

The markets  simply cannot decouple from the financial sector for any sustained period of time.  Either financials are way too cheap, or everything else is too expensive, or both!

I am out of my (CAT) short for a large profit.

I reestablished my (CMCSA) long this morning - as suggested yesterday.

I have moved to medium-sized net long.

I have moved to medium-sized (from large-sized) in both (CAT) and (AAPL) .

* Making some moves now...

I have added to (VIAC) .

I am reestablishing long positions in (DIS) $99.90 and (FDX) $103.70.

I am adding to (C) and (BAC) .  

I covered a small amount of my (AAPL) $303 and (CAT) $101.30 shorts.

Technical levels can be very important - specifically Dow 23000 and S&P 2790. They will be watched carefully. 

If they break, do cascade selloffs follow? If not, could mean bulls try to circle wagons. 

New outbreaks in South Korea and China could be critical to market trading. Sensitivity will remain. Watch levels. 

Stay safe. 

Arthur

Initial jobless claims were 2.98 million, about 500k above expectations but continues the moderation in the pace of increase since the peak in late March. The numbers though are still alarming of course but with more reopenings occurring in the coming months they should continue to recede. Continuing claims though will remain high as the pace of rehiring's will be gradual and coincident with the pace and degree of the reopenings. Continuing claims for the week ended March 2nd totaled 22.8 million, up almost 500k from the week prior but below the estimate of 25 million.
Here is a one year chart on initial claims:

Here is a one year chart on continuing claims:

Source: Peter Boockvar

That extreme bearish read in last week's AAII individual investor sentiment read did moderate only slightly this week. Bears fell 2.1 pts to 50.6 off the highest level since 2013 when the taper tantrum rattled investors. Bulls were little changed at 23.3 from 23.7 last week and which was the lowest since October. With respect to other sentiment reads I unfortunately did not see yesterdays II number (send to me if you did). Last week's bull number was approaching 50. Here is a chart of the Citi Panic/Euphoria index from last weekend. The CNN Fear/Greed is at 38, in the 'Fear' category.

Bottom line, its a mixed bag with the sentiment gauges. The individual investor is clearly worried in the short term as they are likely voting the economic reality they see around them. The 'professional' investor is likely looking at tech stocks and charts with the mood following price but with underlying worry in everything not tech.

I'm going to highlight again the disconnect between the stock market and the Treasury market with the 10 yr yield back down to .61%. On a closing basis it got as low as .54% on March 9th. Again, I believe the stock market is mostly focused on the reopenings while bond participants are concerned about its pace and the very gradual recover we are most likely to see. That said about stocks, underneath the excitement that somehow some tech stocks are immune to what's going on, there is quite a different picture with many other areas of the stock market. The equal weight S&P 500 index is down 22% year to date while the market cap weighted is lower by a more modest 13%.

Let's look at corporate credit now that we are in the week where the Fed is in the game. The Barclays IG OAS spread closed yesterday at 211 bps in a range now over the past month as seen in the chart. That's well off the peak of 373 bps on March 23rd but still twice the level of February. The high yield OAS spread in the Barclays index is at 735 bps, also in a range over the past month. It got as high as 1100 bps in March but is also double where it was in February.

IG OAS spread

HY OAS spread

On the topic of negative interest rates, Governor Bailey at the BoE today said they are "currently" not considering negative interest rates as it "would create problems for banks." Considering the problems it creates, I would rather hear him say they will NEVER consider negative rates.

In Australia, a proxy of Chinese growth but also suffering from similar forced shutdowns as the rest of us, they saw a job drop of 594k in April vs the estimate of down 575k. For perspective. For perspective, they averaged job gains of 21k per month last year on a population of about 25mm.

* The markets are about 4% lower this week
* I profitably covered my short Index hedges
* The S&P Index is approximately fairly valued at 2810 and within my projected trading range (2550-2950)
* Listen to the "billionaire bears" but don't stray from your disciplines

"In this quest to seek and find God in all things, there is still an area of uncertainty. There must be. If a person says that he met God with total certainty and is not touched by a margin of uncertainty, then this is not good."
- Pope Francis

When the S&P moved over 2940 three days ago, reaching the upper band of my projected trading range, I used Divine Ms M's indicators to give me confidence in boosting my S&P, Nasdaq and Russell short hedges in "Robinhood is the New Retail, But Will Then End of the Lockdown Lead To a Market Swoon?":

* With volumes declining and institutional positioning light, a new buyer, Robinhood, has emerged as an important market buyer and influence
* In early April I anticipated a rip your face rally and the mother of all short squeezes
* But, all good things come to an end as I expressed in the beginning of May in "A Time to Plant and A Time To Pluck Up Which Has Been Planted"
* I added to my short exposure after the close on Friday - shorting SPY at $293.40 - as futures carried through the trading session's sharp gains (and were within 1% of the top end of the anticipated trading S&P range (2550-2950)

"Upside reward no longer dwarfs downside risk as was the case six weeks ago." 

Indeed, the near polar opposite condition of March exists today, in the middle of April, for the markets. (Check out Divine Ms M's morning column on the rising euphoria in the Citigroup Panic/Euphoria model and the overbought conditions - particularly in the Nasdaq). It is time, again, for me, to grow cautious on the outlook for equities and pluck up what was planted in March."

The markets are down by about -4% this week and as the Indices declined I profitably covered my (SPY) , (QQQ) and (IWM) shorts Tuesday evening.

On Wednesday, spot S&P closed at about 2810 - almost exactly equal to my "fair market value" calculus of 2800 and within my 2550-2950 trading range.

I would describe the averages as muddled and about fairly valued - and I have no Index positions on (long or short).

"The Billionaire Bears"

Finally, I wanted to comment on the billionaire's market forecasts - paraded on FinTV all week: an uber bearish Stanley Druckenmiller, a downbeat David Tepper, a worried Jeff Gundlach, and the others.

Listen to them carefully, but avoid hyperbole and don't abandon your risk appetites and profiles - stick to you disciplines and time frames.

For every bearish Druckenmiller, Tepper and Gundlach, there is a Cooperman (market is generally fairly valued but there are undervalued stocks), Marks and Miller.

As, importantly, "the billionaire bears" are not short, they are net long and own their favorite stocks.

And, like all of us, these guys are often wrong but the key to their overall success is that they quickly respond to changing conditions.

They all could flip on a dime, particularly if the health and medical communities come up with therapeutic relief or a vaccine.

Bottom Line

These are unresolved and even precarious times shrouded by physical disorientation and insecurity in which uncertainty is the only known that we can seemingly quantify these days.

But opportunities emerge from unsettled periods - always.

I start the day in a small- to medium-sized net long exposure.

I will be out of the office between 9 am and 10:30 am - taking Covid-19 and antibodies tests.

Danielle DiMartino Booth on Food Storage Capacity (and by inference, the attraction of packaged food stocks -- such as Kraft Heinz (KHC) , J. M. Smucker (SJM) and TreeHouse Foods (THS) ):

• The April core CPI's decline of 0.4% was the largest ever, while the headline declined 0.8% -- anchored by sinking prices at the pump; deflation is evident as 10-year inflation expectations dropped to 1.07%, roughly half of the Fed's target rate of 2%
• Nondiscretionary inflation, which is falling, tends to be stickier relative to discretionary purchases, where prices have fallen more; since December 1998, nondiscretionary deflation was prevalent only 3% of the time while discretionary prices fell 15% of the time
• The fear of shortages combined with coronavirus-catalyzed stay-at-home orders drove consumers to stockpile chest freezers, creating shortages and higher prices for the appliances; shifting consumer behavior may permanently raise demand for at-home food storage

Rotten Tomatoes ranks 1997's Batman & Robin an embarrassing 11% on its Tomatometer. Out of 90 people queried, 80 rated it rotten. Critics also pulled no punches. "Joel Schumacher's tongue-in-cheek attitude hits an unbearable limit in Batman & Robin, resulting in a frantic and mindless movie that's too jokey to care much for." Speaking of jokey, that's what we liked about the movie. Do you share our affinity for quirky humor? Then Arnold Schwarzenegger's portrayal of the puny Mr. Freeze will warm your heart. For good measure, we listed his top three worst one-liners: 3) "What killed the dinosaurs? The Ice Age!" 2) "You're not sending ME to the cool-ah!" and 1) "Let's kick some ice!"

Tuesday's Consumer Price Index (CPI) report put inflation on ice -- to the core. The 0.4% monthly decline in April was the largest in the series' history which dates back to 1957. A host of core prices related to travel, autos and pets registered what the Bureau of Labor Statistics (BLS) called "smallest ever" one-month performances: Car and truck rental (-16.6% month-over-month), Airline fares (-15.2%), Motor vehicle insurance (-7.2%), Lodging away from home (-7.1%), Apparel (-4.7% month-over-month), Pets and pet supplies (-2.7%), Parking fees and tolls (-1.7%).

Let's just say the deflationary impulse was more obvious than its inflationary counterpart. The headline CPI declined 0.8% in April, the largest monthly drop since December 2008 and the closest we've flirted with deflation in five years. The chief culprit was the 20.6% plunge in gasoline prices at the pump. Ten-year inflation expectations, the difference between nominal and real 10-year Treasury yields, edged down to 1.07% by Wednesday's close, ever further away from the Fed's 2% inflation target.

As we've lamented in the past, central bankers have brainwashed investors to falsely focus on core inflation, which excludes food and energy. Name one household (that doesn't have cooks and drivers) that excludes food and energy from their monthly budget. [Insert crickets sound here.] To cut through the bull, we contrast price trends between consumer needs and wants.

With the exceptions of car insurance and parking fees and tolls, record deflationary readings were conspicuous in their presence on that laundry list of categories above. Combined with voluntary spending cutbacks, demand destruction tied to involuntary closures pushed our measure of discretionary CPI deflation to a -1.7% year-over-year rate in April.

At the risk of inserting confusion, nondiscretionary CPI inflation also eased in April, to a 1.3% annual pace. This metric rearranges goods and services into a typical household budget, including the usual suspects of the food on the table, the roof over the family's head, the utilities that warm and cool said abode, the gas in the tank and the healthcare that ensures all inhabitants within are, well, healthy.

Much to the future stress of already stretched households, tempered nondiscretionary inflation will not persist. Social distancing websites that had graded the country a 'C' as recently as last week are now at a 'D-." In other words, we're moving around more and in fact, satellite imagery reveals that we're more mobile than any of our European counterparts that were lambasted with COVID-19 before we were. Production cuts in the oil patch are another mitigating factor that will place a floor under pump prices. The massive energy drag should not be repeated in the May CPI report.

We know it's shocking, but nondiscretionary (unavoidable) inflation is stickier than its discretionary peer. Over the 257-month data series we've created dating back to December 1998, "needs" inflation has printed below zero in seven months, or 3% of the time, while "wants" inflation dipped into negative terrain in 38 of those months for a 15% hit rate.

Mangia! (When are we not hungry?) On that note, we think the stickiest inflation will be for the items households are stockpiling in their pantries, refrigerators and freezers. Nearly every "largest-ever" monthly increase recorded in April's CPI came in the food category.

The Association of Home Appliance Manufacturers (AHAM) validates the data. In AHAM's monthly report on domestic shipments of major home appliances, chest freezers did a moonshot. We're not talking freezers that are appendages of your fridge which open on the left or above. Standalone chest freezer shipments surged at an unprecedented 184% monthly rate in March. Holy Batman!

Today's Feather title paraphrases one of Mr. Freeze's eye-rolling one-liners to emphasize the point. Anyone who tried to buy a freezer from Home Depot, Lowe's or their local appliance store in March as Coronavirus was spreading was confronted with higher prices and supply shortages.

Almost overnight, the COVID shock has generated a structural change toward more at-home food storage. No doubt, this shift in consumption behavior will work to the benefit of the companies fortuitously positioned with the largest market shares in the food preservation appliance industry.