I have a lengthy Board of Directors call at 4 pm so I am outta here early today.

Thanks for reading my Diary.

Enjoy the evening.

Be safe

I have closed out my (SPY) strangle for a loss.

Lance Roberts' post is worth a read.

Thursday's close is the end of the first quarter.

Given the relative performance of the asset classes, I would expect a large reallocation out of equities and into bonds that day.

I have been completely wrong about the market's direction over the last 10 days. 

Discipline and risk management trumps conviction. 

As a result, I have reduced my gross short exposure.

I am quite surprised about the market's strength seen today. 

Once again the bulls have been bailed out.

Good post from sub, DonK:

DonK

Not only has the AMC price move been crazy, but so has the volume. 226m shares traded yesterday and 150m so far today, not even halfway through the trading session. Still dwarfed by the 500-700m shs being traded on this last June and Jan 2021.

As I mentioned yesterday, the recent popularity and interest in meme stocks is a late market cycle phenomenon.

Continuing Turkish rumors of progress in Russia/Ukraine talks carried us to the high of the morning. We have pulled back after Secretary Blinken said the U.S. didn't see any progress or overtures from Russia. That, as I said, took away the high edge, but there was not enough to let oil rebound or take stocks into negative territory.

So, stick close to the newsticker. Beware the rumormongers. So far, it is all gossip out of Turkey and that can be fickle and dangerous.

Stay Safe.

Arthur

 From Charlie Bilello!

Look at the mortgage rate chart! 

S&P CoreLogic said its January home price index rose 19.2% y/o/y. If only a house wasn't most people's biggest life purchase, this inflation wouldn't be that big of a deal. That said, this is likely the peak in the pace of home price gains as in January the 30 yr mortgage rate averaged 3.57% vs the 4.86% it stood last night according to Bankrate.com, the highest in 11 years. Quite the rapid move in a very short period of time.

Phoenix, Miami and Dallas led the gains with Phoenix prices in particular up 32.6% y/o/y. DC, Minneapolis and Chicago saw the slowest pace of gains between 11-13%.

The bottom line is obvious, affordability has deteriorated further but hopefully the spike in mortgage rates will dramatically slow this relentless rise in home prices so the first time home buyer can catch a break.

Bankrate Avg 30 yr Mortgage Rate

S&P CoreLogic Home Price index

The Conference Board's March Consumer Confidence index was 107.2, as expected and vs 105.7 in February (revised from 110.5). The components were mixed as there was a 10 pt rise in the Present Situation but a 4.2 fall in Expectations. Of particular note, one year inflation expectations jumped another 8 tenths to 7.9%, the highest since the question was first asked in 1987. The price of a movie ticket by the way averaged $3.91 in 1987 vs about $12 today to make one comparison. I was paying $25 for a concert ticket then vs at least $250 now for a top act.

As seen in other confidence figures, people are very worried about inflation but the positive has been the current state of the labor market. That was seen in this index as well as the answers to the labor market questions got even better for the present situation BUT softened for the outlook. Those that said jobs were Plentiful rose to the highest level on record dating back to 1967. Those that said jobs were Hard To Get fell to the least since July 2000 and just .2 pts from the lowest since 1967. As for the expectations of the labor market, those expecting 'More Jobs' fell to the lowest since March 2020 during you know what. Income expectations rose a touch after falling last month.

Spending intentions were mixed. Those planning on buying a vehicle fell to a 4 month low but was unchanged for homes m/o/m and rose for appliances after declining last month.

Bottom line, this index was at 132.6 in February 2020 vs 107.2 in March in 2022 and reflects the squeeze on the cost of living that is being partly mitigated by a still tight labor market. Labor market stats are lagging though and as seen above, there are growing worries that an economic slowdown, driven by the consumer, will lead to less jobs, notwithstanding the current strength.

Consumer Confidence

One yr Inflation Expectations

Jobs Plentiful

While this confidence number was for March, it does confirm the 11.27mm job openings that was also reported today for February, just off the record high of 11.45mm seen in December. The quit rate ticked up one tenth to 2.9% after falling by 2 tenths in January. I'm not going to get into the weeds here because it seems like February data, and basically pre war, seems like an eternity ago.

Job Openings in February

I took in (covered) a small portion of my May (SPY) $434 short puts under $5.40.

Secretary Blinken downplays the negotiations.

I am seeing some Nasdaq weakness for the first time since I was Bar Mitzvahed.

Banks are the first group to roll over - after an early morning gap higher. 

I remain cautious on this space as mentioned yesterday.

I have more aggressively raised my gross short exposure this morning.

Stay tuned.

Adding to my Tesla (TSLA) short lower - at $1099.

The market didn't necessarily need much medical help in Monday's trading, but they did look like they ran out of steam several times.

We started out in the morning with mild changes and then it began to look like the somewhat irrational inverse relationship between the price of oil and the price of stocks might finally be coming apart. Oil was down all day. Early on, it was on the closure for Covid reasons in the city of Shanghai. That is a mere 25 million people - about the size of Texas and, China is a primary user of oil and, it was assumed that the shutdown was not just going to be Shanghai. So, that brought early pressure to oil and stocks had rolled over on some confusing views of where rates and the Biden budget might be headed.

So for a while, into late morning and into almost early afternoon, we had oil down and stocks down and, if you were wondering if common sense had returned to the marketplace, that would all change a bit later. In the final hour, stocks came back solidly but not spectacularly, and oil went lower. This time the relationship was almost logical. Just before the final hour began, the Financial Times, I believe, came out and said they were hearing there was some movement in Ukraine peace talks/armistice negotiations. The details were lacking, but that would seem to mean that Russia might be moving since Sunday night, we had known that Zelenskyy had offered to go to neutrality and not demilitarize, but offer some vague assurance to Russia and, therefore, if this was new that would have to mean that maybe the Russians were beginning to move also. The problem here is that there are a lot of young Russians who will never be returning to mom and dad. So, Putin's negotiations are limited by the fact that he has got to show some accomplishment.

Yes, we made sacrifices, but it was necessary, and this is what we achieved and, what they think that achieved goal might be at the least could be the annexation of the two eastern provinces of Ukraine and then perhaps a land bridge between them and Crimea. The difficulty there is a sense that Zelenskyy, after his people putting up such a courageous fight and them making sacrifices might be unwilling to cede territory to Russia lest in their eyes they look like he was awarding the aggressor that they had all mobilized against, but we will leave these geopolitical concerns to people like Clausewitz. But, what it did (this hope of negotiating process) was allow stocks to come back, putting all of the key futures in plus territory for the close and, kept the pressure on oil, which would close very near the low of the day. So, for a change, that bizarre relationship between lower oil and higher stocks actually seemed to make some logical connection if it was related to suspension or at least a movement toward geopolitical peace or at least less geopolitical militarism.

Overnight, global equity futures markets are ticking mildly higher. Throughout the night, there have been hopeful, almost optimistic reports on the negotiations beginning in Turkey, however, we hear from several sources that when the meeting convened, there was not the conventional handshake and, maybe I am too far into diplomacy and courtesy that doesn't seem to buoyed as well for me. Nevertheless, the markets have chosen to be hopeful and, as I say, the futures are better. This absorption of the geopolitics end of the current negotiations have frustrated many of us who are looking at the technicals and had assumed that the rally might roll over. We have been disappointingly waiting on that for several days now.

Let's see if the newsticker remains the dominate force. Due to the equipment malfunction, we will be brief, so let's sum it up by saying keep your eye on oil and the newsticker and clearly any hopeful sign from the negotiations that will help stocks and put some pressure on oil. For the reasons we cited above, however, it seems like there is an enormous gap between Putin and Zelenskyy and, I am not sure there is a lot of room to negotiate.

Remain alert. Keep your seatbelt fastened and stay safe.

Short (small) Tesla (TSLA) at $1111.

Here is a thorough review of early movers in the premarket: 

Upside:

- (IGMS) +40% (earnings, guidance; files to sell $200M common stock)
- (HYMC) +28% (momentum)
- (NLSN) +22% (confirms agreement to be acquired by Evergreen- and Brookfield-Led Consortium for $28/shr valued at $16B)
- (SGRP) +19% (earnings)
- (LOVE) +18% (earnings)
- (RSLS) +15% (earnings)
- (EVTL) +13% (Gözen Holding orders 100 Vx4 aircraft from Avolon to bring zero emissions air travel to Turkey)
-  (DNA) +8.8% (earnings, guidance)
- (LHCG) +7.3% (confirms to be acquired by UnitedHealth for $170/shr in $5.4B cash deal)
- (ASO) +7.2% (earnings, guidance)
- (TBLA) +4.9% (guidance ahead of Investor Day)
- (KODK) +4.6% (Kennedy Lewis Management discloses 7.8% stake)
-  (FDX) +2.5% (Raj Subramaniam promoted to President and CEO, effective June 1st)
- (IONQ) +1.5% (earnings, guidance)

Downside:

- PROG -22% (earnings)
- (SLNO) -17% (files to sell underwritten public offering of stock of indeterminate amount)
- (LPCN) -16% (receives US FDA NDA Type 3 tentative approval for testosterone undecanoate)
- (CONN) -12% (earnings, guidance)
- (LIDR) -8.2% (earnings, guidance)
- (FDMT) -6.9% (earnings; files $300M mixed shelf)
- (PLAY) -5.8% (earnings)
- (ALRN) -4.8% (earnings)
- (REAL) -4.0% (Credit Suisse Cuts REAL to Neutral from Outperform, price target: $8 from $15)
- (SWX) -4.0% (prices 5.5M shares at $74.00/shr)
- (DTC) -1.6% (earnings, guidance)
- (AVGR) -1.5% (files $50M mixed shelf)

More FibroGen (FGEN) data.

While the Bank of Japan held the line on the 10 yr yield at .25% by buying 528.6 billion yen (about $4.3b) in their attempt to maintain their yield curve control, it didn't stop longer end yields from continuing to rise. The 30 yr yield was up another 5 bps, higher for the 6th straight day and the 40 yr yield jumped by 8 bps to 1.14%. I keep talking about the yen and JGB yields because if the BoJ loses control of its yield curve, it opens a whole new avenue for global bond weakness.

Trying to maintain YCC we know, along with spiking energy costs, has driven the yen much lower and the Japanese Finance Minister is again out trying to contain it. Shunichi Suzuki said "We need to closely monitor the impact of the yen on the economy with a sense of urgency...We need to keep watching closely to see whether the weaker yen is starting to have a bad impact." Well, he's fighting his own central bank governor in doing so.

He's trying to contain the yen weakness because it's only exacerbating their energy inflation problems. Today, the president of Kyushu Electric Power, a major buyer of energy imports in order to power these plants, said "The yen becoming weaker is hitting us energy importers because we purchase fuel with dollars. It is extremely worrying." The costs of their LNG imports are tied to the price of oil.

Following the selloff in longer term JGB yields, European bond yields are jumping again and why the US 10 yr yield is back to 2.5% while the 2 yr yield is rising by another 9 bps to 2.42%, less than 10 bps away now. The German 2 yr yield in particular is just 2.5 bps from getting back to zero for the 1st time since August 2014. Keep in mind that the ECB first went negative with the deposit rate in June 2014.

German 2 yr Yield

We have two former central bankers today that are criticizing the policies of their former employers. Former Bundesbank president Axel Weber, who is currently Chairman of UBS, said in an interview on Bloomberg with respect to the ECB raising rates, "I really don't see why it needs to wait till December. Earlier actually can avoid dramatic action later, I think they have to acknowledge the problem and get going." He specifically honed in on the MAJOR ECB mistake that 'inflation is transitory', "Why does it take nine months to acknowledge there is an inflation problem that is more persistent than they anticipated and to say 'kudos, we've misjudged the situation, we have to act now.' "

Former NY Fed president Bill Dudley in a Bloomberg Opinion piece called out the Fed's shift to their inflation symmetry path in 2020 and said "The Fed's application of its framework has left it behind the curve in controlling inflation." That's stating the obvious but he then followed by saying, "This, in turn, has made a hard landing virtually inevitable." The bold is mine. If I had a dollar for every time I said wanting higher inflation to offset a period of low inflation was a TERRIBLE idea I'd be able to buy an ounce of gold.

Vietnam, a growing global manufacturing presence, said March exports rose by 14.8% y/o/y, more than the forecast of up 10.8%. They increased their exports of electronics, fuel, certain foods, plastics, papers and textiles of note. Imports grew by 14.6% y/o/y, just below the estimate of up 16.4%. I remain bullish on Vietnamese stocks. The Ho Chi Minh index was up by 36% in 2021 and is flat this year.

German consumer confidence fell to -15.5 from -8.5 and that was 1 pt worse than expected. We can of course blame much on the war and the subsequent spike in energy costs. GFK said "While the propensity to buy recorded moderate losses compared with the previous month, the economic and income expectations slumped, in part registering new record lows following the 2009 financial crisis." How are consumers responding to the jump in their cost of living and what it means for consumer sentiment? "A sharp increase in the propensity to save in March further reinforces the downward trend" in confidence. The 'income expectations' component lost 25 pts to the lowest since January 2009. "Consumers are seeing their purchasing power melt away as a result of the sharp increase in prices when it comes to gas, heating oil and gasoline."

Not surprisingly French consumer confidence for March was also softer, down 6 pts m/o/m to 91, 3 pts less than expected. The 'Personal Financial Situation' component declined by 16 pts to the lowest since 2014. The 'Standard of Living' component dropped by 21 pts to the weakest since November 2020. The same worries as the German citizenry obviously apply here but at least the French didn't shut down their nuclear plants and still get about 70% of their energy needs from them and thus making them much less reliant on the Russians.

Bottom line, Europe is headed for a recession, driven by its consumers, and the ECB will still have to raise rates into this because of the poison of NIRP and QE.

German Consumer Confidence

Surprising to many, including myself: 

Growth outperformed Value despite rising real rates

Indexed to 100

With the benefit of hindsight the correct trade was to have bought at the sound of canons.

Might it follow that we should sell now - at the sound of trumpets?

Another very interesting tweet from El-Erian:

Break in!

Apparent progress in Ukraine/Russia negotiations reported just now.

Recession odds are rising:

They are back.

As an example, yesterday, AMC Entertainment (AMC) and GameStop (GME) share prices rose by +45% and +24%, respectively -- for no apparent reason.

Typically, this is the sign of the end of a Bull Market, but there is nothing normal about today's market.

What I do know is that what we have learned from history is that we haven't learned from history.

Single digits on 2s/10s now:

Credit Suisse (CS) lowers Q1 and full-year estimates for Goldman Sachs (GS) :

The operating environment is dynamic at best. To reflect (i) the first quarter's weaker than initially forecast investment banking revenue generation (our estimates now follow the Dealogic data, through March 24th), with a slower rebuild to "normal" as the year progresses; (ii) the impact of asset price declines on both direct investments and traditional asset management fees; and (iii) assuming less operating leverage against this backdrop/at the start of the year (we've assumed that compensation dollars decline year/year, in sync with revenue, translating to a higher comp accrual rate at the start of the year), we're reducing our first quarter estimate to $7.80 from $9.01 (FactSet consensus is at $9.96); realization of our 1Q22 estimate would translate to a respectable ~12% ROTE (on ~14% CET1); our full year 2022 estimate declines to $37.75 per share from $39.25. Our 2023 estimate is unchanged at $42.50, with the assumption that trading and investment banking revenues migrate to a trend line supported by economic growth. Our target price is unchanged. Risks (+/-) to the achievability of our estimates and target price tie most closely to the health of the macro and market backdrop as well as management's execution against strategic initiatives.

I remain on the sidelines with this name.

Monday was another session of much higher prices and lower volumes:

The strength of Monday's trading session was unexpected to me.

I expected the opposite -- a gamma squeeze hangover early this week into an overbought (and elevated S&P Oscillator).

Well, we are now more overbought (thanks to peace talks buoying stock futures) given that the S&P Oscillator has risen to a very overbought reading of 6.01% from 4.79% on Friday.

Perhaps peace is near in Ukraine.

I don't know.

* The market (and money) never sleeps

"Workin' on our night moves
Trying to lose the awkward teenage blues
Workin' on our night moves
In the summertime
And oh the wonder
Felt the lightning
And we waited on the thunder
Waited on the thunder."

- Bob Seger, "Night Moves"

I described the importance that overnight futures trading holds for me in this column a few weeks ago. It is a guidepost to my strategy in the regular trading session.

Moreover, the overnight/early morning futures hold opportunities as they are (1) inefficient, though liquid, and (2) it seems fear and greed is often exaggerated outside the regular trading session.

It was an extension of Monday's gains in the evening/early morning for futures. Gold was -$30 and Brent crude is flat.

Bond yields of the long end are flat have resumed their uptrend.

S&P futures peaked at +25 and bottomed at -3. At 5:50 am ET they were at +21.

Nasdaq futures topped out at +95 and dropped as low as -28. At 5:50 am ET they were at +88.

As I wrote above, money never sleeps!