Fra Zerohedge:
Over the past dew days, Bloomberg market commentator Mark Cudmore has been decidedly skeptical of any rebound observed in US stocks, and overnight he did not change his sentiment despite what some have said is an attempt for the reflation rally to reassert itself. In a note titled “Why I Don’t Believe in This U.S. Equities Bounce” he explains why, giving seven reasons why despite stocks seemingly poised for a third day of gains, he refuses to BTD and chase the latest rally.
From Bloomberg
Macro View: Why I Don’t Believe In This U.S. Equities Bounce
U.S. equity futures are headed for a third day of gains, with consensus growing that the March correction is already over and record highs will soon be hit again. I’m not so positive and here’s why:
- The prospect of imminent Trump stimulus has been severely undermined, both in terms of size and timing, as it’s now quite clear that the U.S. president will face a struggle in everything he wants to do.
- The hard economic numbers in the U.S. continue to disappoint even though survey data is strong.
- While commodities are trading positively this week, most remain well below their February peaks, reflecting a lack of exceptional real demand.
- Wednesday saw the second-lowest transaction volume of 2017 for S&P 500 stocks, which indicates a lack of conviction in the bounce.
- With both month-end and quarter-end rebalancing flows, this week was always expected to be choppy, meaning it’s important not to read too much into every little move; what’s more relevant to note is that equities are still below their opening level from last week.
- Also, consensus 2017 trades — long dollar, short Treasuries, short pound -– have done poorly in March, which is a blow to risk appetite.
- The summary is that the fundamentals have shifted negatively. I’m absolutely not a structural bear on U.S. equities, but I do believe that the change in fundamental outlook warrants lower prices in the coming weeks.
That said, he echoes what RBC’s Charlie McElligott said earlier this week, and admit that as technically the bounce is starting to look solid, “bears need the rally to fail very soon or admit defeat.” He look forward to what Dennis Gartman will say today for confirmation.
