2020/07/07 Commentary: Rapid Evolution Into New More Timely Research

© 2020 ROHR International, Inc. All International rights reserved.

COMMENTARY: Tuesday, July 7, 2020

As Evolutionary Trend View analysts, in all modesty we are fairly adept at 'reading the tea leaves'. Yet that is much easier when the world isn't pouring a fresh cup every single day. And the current politico-economic election-pandemic multi-tiered nexus of news and events has become a bit of an issue in its own right. Our blog posts have been intended to establish a somewhat durable view of the macro-technical matrix for informed  market assessment over a multiday period. Yet the rapidity of the recent developments that is likely to continue into a more intense political-pandemic mash up over the coming months leaves the classical durability of our post perspectives a bit wanting by only a couple of days later. In many cases the situation has markedly evolved after just 24 hours. 

It is not that the views are not relevant and the forward view less than credible. It is more so that the various factors are evolving so quickly that the benefit we wish to impart from our evolved capital markets perspective require more active updates than weekly posts are capable of delivering. Therefore, from today forward we will be providing the best benefits to those seeking relevant and meaningful insights through our daily research letters.

That is the Rohr ALERT!! on the fully current 'macro' background and the Evolutionary Trend View of the S&P 500, or the Rohr Research Note that includes all of that and the additional edge of the international markets technical assessments. 

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We look forward to assisting you with further, more timely access to the perspectives and Evolutionary Trend View you have been benefitting from in our Rohr-Blog posts.

Best regards-

Rohr

2020/06/15 Commentary: Colossal Cross Currents Complexity

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COMMENTARY: Monday, June 15, 2020

Copyright CNBC 2020   All International Rights Reserved

Hypervolatile price swings in US EQUITIES seem to be justified by the flip-flops in major ‘macro’ factors. And those will continue to buffet the markets.

Yet over the near-term they are becoming more nuanced; complexity is also becoming as colossal as the major factors in a very critical market phase. And that complexity means this is a more extensive Rohr-Blog post than we have published for a while in order to delve into those subtleties.

The question that hangs in the balance is whether the US EQUITIES rally extension two weeks ago was the ‘real’ trend, or just a near-term upside ‘aberration’ in a bear market rally? The answer to that question will not just be critical for the next major US EQUITIES trend decision into this summer.

Whether there is a general ‘risk on’ or ‘risk off’ psychology will also be very significant for the GLOBAL GOVVIES. Note their sharp recoveries in the past week on US EQUITIES weakness after those same GOVVIES were the weakest they had been in a while on the early June US EQUITIES strength.

And to the degree GLOBAL GOVVIES did not fail below key lower supports, they had already continued to hint at more economic weakness to come. While recently strong EMERGING CURRENCIES had eluded any return of a ‘risk off’ psychology into the middle of last week, Thursday it returned for the first time in several weeks.

Major Cross Currents Already Reviewed

As to our previous broad range of analysis last week, Friday’s ‘And So It Goes’ research note communicated that we had already reviewed the major areas of concern outside of specific COVID-19 developments. This included Monday’s ‘Social Shift or Just a Blip?’ research note exploring whether prominent US anti-discrimination protests were encouraging a significant political change into the November general election.

It was followed by Wednesday morning’s ‘OECD Rains on Friendly Fed Party’, which shared OECD’s very downbeat World Economic Outlook prior to the FOMC announcement and Fed Chair Powell’s press conference (https://bit.ly/2XSw2mU.) Therefore it was already the case that the OECD had set the table in a major way for Powell to be less than optimistic (https://bit.ly/3hg8mAz.) As we had observed Wednesday  morning, the third OECD page panel includes the graphic (and link to animation) on just how weak the global economy is going to be even without any COVID-19 resurgence (with much more from many other OECD links.)

Fed Communication Disappointment

What was clear even from later Wednesday (i.e. prior to the Thursday US EQUITIES debacle) was US EQUITIES disappointment with Powell’s downbeat view yet with no further immediate stimulus. Hence Thursday’s research note title (ostensibly the question from US EQUITIES to the Fed) ‘So, What Have You Done For Me Lately?’

As we noted Wednesday morning, insofar as the US EQUITIES were entertaining potential for a push through higher resistance they are “...vulnerable to hoping the Fed will also announce some additional stimulus this afternoon…” Once that did not occur, the psychology became stale. After the US EQUITIES sharp selloff back to lower major support (more below), they as well as other asset classes are left with a critical psychology into this coming week.

And on top of all that was news out of Wednesday into the end of last week on rising COVID-19 infections. That last bit may be the most toxic of all in the context of various ways it might undermine the US economic reopening. However, this is another area where the news is not completely clear at this time (more below.)

Multiple Major 'Macro' Factors

These cross currents are indeed colossal insofar as a US political change along with how the stabilized economic situation evolves after various US and other government support programs lapse, and also the path of progress against COVID-19 contagion, all have potential to foster agony or ecstasy on the US and global economy and markets. We are therefore especially watching US EQUITIES.

Yet the manner in which the macro factors are evolving across all of these fronts is becoming more complex, and requires nuanced analysis. First are COVID-19 issues, where rising infections have elicited heightened concerns. There are three critical factors, the first of which is at least so far this does not appear to be a resurgence in the hardest hit areas like the US northeast corridor. There is also the consideration of states which avoided significant infections in the original ‘first wave’ are now seeing them rise… likely more so a first wave extension.

Cumulative COVID-19 Concerns

And governors of states anxious to reopen are rightfully pointing out that the major increase in testing was bound to uncover higher levels of infection. This is all fine and good. Yet as we have noted previous, a heavy splurge of unprotected (i.e. sans masks and social distancing) activity in many precincts around the US Memorial Day holiday leaves this coming couple of weeks the horizon for when greater infections based on renewed contagion could be the case.

We shall see. As of this weekend there are 21 states which are showing seriously heightened levels of COVID-19 infection. Those especially include the southwest (Texas and Arizona) and west (California.) Yet pandemic infection and hospitalization problems are as bad or worse elsewhere.

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2020/05/04 Commentary: Downside Volatility Indeed… Now What?

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COMMENTARY: Monday, May 4, 2020

Courtesy CNBC © 2020 All Rights Reserved.

The US EQUITIES have seen a selloff from very near anticipated key resistance. And the volatility seems to confirm overall bearish trend tendencies. Yet the rapid selloff raises questions over why the reversal of the sustained recovery rally was so sharp, and why it might have happened on improved news?

We now temporarily digress into data and market considerations. Data (especially today’s Friday Early May holiday-delayed Euro-zone Manufacturing PMIs) is more or less as expected. Yet that still means very bad. And in its own right along with being a psychological bellwether for other asset classes, the JUNE S&P 500 FUTURE fell back from the resistance we had anticipated to below 2,850 support, with 2,750 the next level. That said, if it holds there, another rally could occur if stressors abate.   

For more on the reasons for the US EQUITIES spill, see Thursday’s ‘Friendly Fed Indeed and COVID Cure?’ research note. In this case ‘Friendly Fed’ meant not just the Fed but also overall from all of the central banks last week, including BoJ last Monday and ECB on Thursday.

The one disappointment we noted on Friday was lack of a formal ‘Eurobond’ (pan-European funded government bond) from the ECB. That was blamed for some of Thursday’s later losses, but there is quite a bit more below.

Central Banks Still Not the 'Cure'

Yet as we noted during the initial phase of the COVID-19 sharp bear selloff back on March 3-4, the major FOMC rate cut was not going to in any way address the problems created by the novel coronavirus. Hence a sharp MARCH S&P 500 FUTURE recovery rally from below 3,000 only carried very temporarily (for a couple of hours on the rate cut morning) above 3,100 prior to failing again.

Further confirmation of our view on the morning of March 3^rd doesn’t even require any reading of previous research notes. As luck would have it, I had ventured down to the Chicago Mercantile Exchange that morning to be interviewed by Price Futures Group’s energy specialist Phil Flynn.

When apprised of the Fed’s 0.50% cut (of which I had not been aware due to being in transit), my visceral response was, “It’s meaningless.” While I communicated that in less aggressive terms in the actual interview (https://bit.ly/2L0UUkS), there was also clear MARCH S&P 500 FUTURE bear trend reversal skepticism (03:20-04:00) that noted the specific technically significant price levels to watch despite that morning’s very sharp rally.

A further fall was also only temporarily stanched into Wednesday by Joe Biden’s Super Tuesday primary election victories. Yet that failed again by that Thursday. The combined inference on those was that the broad central bank commitment to provide further support isn’t going to be a primary factor in reversing the bear trend.

The Real Partial 'Cure' NOT a Panacea

There was also the key factor on the temporary COVID-19 ‘cure’ factor euphoria last week. While Gilead Sciences’ remdesivir is great for treating those seriously ill with COVID-19, it is indeed only useful once someone is very sick. It is not a ‘preventative’ like a vaccine.

As such, it is neither going to provide anyone more confidence they can resume ‘life as usual’ from prior to the COVID-19 pandemic, nor assist the global economy in providing income for businesses or work. For more on those issues please see last Wednesday’s ‘Short-Term’ versus the ‘Long Arc’ Rohr-Blog post.

The bottom line for public-engaged businesses is that social distancing-based restrictions on their traffic and income will still be in place through this Summer into the Fall. And even achieving any improvement back to those diminished performances is based on a public appetite for getting back to their previous socializing and spending habits. Is this realistic?

A 'Long Road Back' Indeed

As for socializing, there is a case for some improvement. Yet it is only back above the very low bar of the current broad-based quarantine. And we have previously noted at length (see the Rohr-Blog post) the limitations from a business model standpoint, as well as the consumer attitude (once again see a recent CBS News poll https://bit.ly/351adDz.) And it gets worse on overall consumer spending…

... as it appears it will be the ‘long road back’ we have suggested rather than the very strong rebound (‘V’ shaped recovery) the Trump administration is touting. That CBS News poll is reinforced by more recent indications on business and consumer activity, justifying all around skepticism. CNBC’s Steve Liesman had a very good analysis (https://cnb.cx/3c5kBgb) based on insights into the progress of the US reopening, even allowing it is still very early days.

Yet rather than reversing, the store closings are still up 14%. Liesman points out this may be due to some stores that held on for a while, yet now realize they will not be economically viable (as we had suggested might occur.)

Medically, new infections are still running at the same 30,000 cases where it has been. And even averaging cities in 10 now newly partially reopened states, according to the widely respected TomTom surveys, store traffic is still only 22% of normal.

Liesman seems to agree with our views in noting there may be a secondary wave of stores closing due to economics. And he once again highlights the issue of whether consumers will return to old habits. Playing on the words of the classic 1989 movie Field of Dreams “If you build it, he will come”, he ends his key points with the consumer proclivities question, “If you open it, will they come?”

Chinese Consumerism RIP?

There is a good chance at least for the intermediate-term the avid consumerism of recent decades may be seeing a major reset. Of special note is the attitude of younger Chinese consumers who had previously abandoned the frugal habits of their elders to join a debt-fueled Chinese government mandated shift to a more consumer based economy. Might there be a permanent shift back to frugality?

Authorized Silver and Sterling Subscribers click ‘Read more…’ (below) to access the balance of the opening discussion. Non-subscribers click the top menu Subscription Echelons & Fees tab to review your options. Authorized Gold and Platinum Subscribers click ‘Read more…’ (below) to also access the Extended Trend Assessment as well.

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2020/04/29 Commentary: 'Short-Term' versus the  'Long Arc'

© 2020 ROHR International, Inc. All International rights reserved.

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COMMENTARY: Wednesday, April 29, 2020

Courtesy of Reuters ©2020 All Rights Reserved

While the current recovery rally in US equities is very impressive, there is a question over whether it is a new bull market or indeed merely a recovery from the all-time most compressed bear move ever in the history of the markets?

Many challenges that bring the current US equities trading levels, or even more important higher prices into question remain. There are myriad health, economic and financial influences, some of which encourage current enthusiasm while others bring it under serious suspicion. Of particular note are the drags on dining, travel and hospitality businesses from likely sustained social distancing restrictions and new disinfectant requirements.

That is not just regarding government mandates. It is also part of addressing a very skittish consumer psychology. As the epidemiological experts have told us COVID-19 is going to be with us for a while despite recent suppression, the 'public gathering' psychology will be affecting these businesses despite the various current global reopening attempts. 

This is where the 'short-term' enthusiasm runs up against the 'long arc' of the sustained performance for many companies, and by extension the employment picture and overall US and global economy. As noted previous, the outlook for the global economy and markets is heavily bifurcated. There is going to be a 'pre-vaccine' phase and (hopefully) a 'post-vaccine' effective return to a happier time.

The 'New Abnormal'

While some informed folks have alluded to the upcoming phase into this Summer's reopening of various global economies as another 'new normal' (like after the 2008-2009 Crisis), this is misguided. There will be nothing 'normal' about it, which is why we have chosen to deem it the 'new abnormal'.

That will be the 'pre-vaccine' phase for however long it may last. Only once there is an effective, broadly distributed vaccine (the 'post-vaccine' phase) will the government-prescribed restrictions on the public gathering aspects of global economies be lifted. As important will be the constructive improvement in the consumer's appetite for previously normal close quarters (restaurants, gyms, airplanes, etc.) 

In the meantime, the scene from the reopened Hong Kong restaurant at the top of this post will be the 'new abnormal'. And the commercial impact on many businesses as well as the broad implications for the global employment picture should give some pause to those who are very friendly to the equities at present valuations.  Are the earnings that support the US equities (and others) valuations actually return to anything near the levels seen prior to the COVID-19 pandemic?

Spring 2008 Psychology Redux

While a much more distended modern bear trend that at present (as all of them are outside of 1987), the ‘macro’ psychology reminds us of Spring 2008. A quick look at the partial 2007-2009 chart (https://bit.ly/3aLtGZW) shows how the gradual late-2007 to early-2008 FRONT MONTH S&P 500 FUTURE bear trend had an upside reaction from the January-March 2008 lows. That peaked in May 2008 around the important low-1,400 area congestion (also weekly MA-41.)

There was also an abiding sense back at that time that the already accommodative Fed along with government funding would get the economy and markets past the looming Credit and Housing Bust. In certain quarters at present there are very similar ‘market looking past the trough’ thoughts to those widely prevalent back then.

In 2008 that was possibly due to a lack of understanding of the banks’ vulnerability. Now it is on hopes there will either be a miraculously rapid vaccine development (well short of the likely 12-18 month minimum), or that the partial economic re-openings will go well despite signs of the COVID-19 contagion not abating outside of social distancing suppression.    

That said and just to be clear, we believe 2008 is NOT an analog for the future current activity if the recent upside equities reaction fails. To equal the drop into the late 2008 low (relative to the 2007 high back then to the March 2008 low), the new low below the current more aggressive initial drop to the 2,174 March low would project the current FRONT MONTH S&P 500 FUTURE to a new low of almost exactly… 650!! 

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2020/04/19 Commentary: Snatching Defeat from the Jaws of Victory

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COMMENTARY: Sunday, April 19, 2020

Both sides in the US government COVID-19 response seem to be working against their own interest. It may seem we are overly focused on US politics now. Yet they are critical due to US economic factors… and by extension the market impact.

And as noted in last Thursday’s ‘We Call ‘Em the Way We See ‘Em’ research, complaints from select Trump supporters that some of our analysis seemed ‘anti-Trump’ is laughable. We are equal-opportunity critics, and are more than happy to highlight misguided assertions from anyone, including central banks, governments, corporate executives, and so on. Our extended discourse on that in last Thursday’s research note included the overview of how we did so in all previous serious market failures going back to 1987, 2000 and 2008.

Misguided Democratic Agenda Push

Back to the present again for non-US readers, recent actions and communication are classic examples in American politics of one side having an edge but then striving mightily to ‘snatch defeat from the jaws of victory’. Last Tuesday we cited Senator Rubio's disparagement of the Democratic House leadership’s refusal to support an automatic extension of the Paycheck Protection Program (PPP.)

To wit, (paraphrased) “...imagine the impact on the public psyche if they are told a program that was at least partially effective is being shut down due to Congress not being able to agree on providing more money for something that is already in place and functioning.” While we do not always agree with them, it would seem the Republicans had a legitimate point in this case.

And if Speaker Pelosi and her House comrades wanted more money for hospitals and very small businesses, they could have easily floated a new bill in the House. She would have had the backing of her Democratic majority, and the Republicans would likely have gone along.

Yet there is a political dynamic here: They want to have their demands included to create talking points for the election campaign into this November: their changes made it ‘better’.

Is this a great country… or what? Yet that may be moot, as the Republicans have capitulated on allowing for some additional Democratic demands for funding for other sectors, and promised future funding for state and local governments in separate bills. Good for them for not letting fragile small businesses be even more nervous on the program and susceptible to failure for lack of funding.

Trump Still Testy on Testing

Yet our greater criticism wheels back around to the Republicans, and specifically the still incorrect missives from Dear Leader Trump on ‘testing’. He has continued for a long time (in COVID-19 pandemic evolution terms) to assert the US has a strong infection testing facility. This was not true on March 6th when he clearly (mis)stated, “Anybody who needs a test, gets a test…” (http://bit.ly/3cUM2dm.)

While one might think that a month-and-a-half later that might be accurate, it is still not the case; at least not on the scale necessary to move toward his highly touted staged reopening of the US economy. In fact, Governors from both sides of the political aisle were all over the Sunday political analysis shows decrying Trump’s misguided claims, Republicans as well as Democrats.

The most damning likely came from a fellow Trump Republican Party member, who has praised the federal government for some things they have indeed done well. That is Maryland’s respected Governor Larry Hogan, also the Chair of the National Governors Association. While appearing on various Sunday shows, his most telling perspectives and points were derived from an extended interview on Jake Tapper’s CNN State of the Union (https://cnn.it/2RTdwHp.)

Governors Have Legitimate Issues

Proceeding through various topics, Tapper got Hogan’s responses Democrats holding up that PPP funding (01:00), noting that the governors did not want to have funding for their states delay the funding for small businesses. Hogan went on to note (02:30) that the President’s own guidelines are conditions that are not being met in his state (and many others.)

And regarding Trump’s assertion that the Governors need to get more aggressive and are dragging their feet where they already have ample testing ability (03:30-05:30), Hogan is very pointed: After video clips of Trump and Pence making those assertions on the availability of ample testing availability, Hogan first says that this has been a complaint of his since the spread of the novel coronavirus started, and he is hearing the same from Governors on both sides of the aisle every single day.

Then there was this…

“...to try to push this off to say that the Governors have plenty of testing and they should just get to work on testing, somehow we are not doing our job, is just ‘absolutely false’.” (Our additional punctuation) “Every Governor in America has been pushing and fighting and clawing to get more tests…”  So there you have it.

What Kind of Testing?

The other aspect that has been sorely lacking is any indication on the type of tests the federal government says it is ramping up at present. Are they the same tests which we have already had? Our understanding is that those were the 4-5 day results tests.

Well, those are not very effective for re-opening an economy where there will be close quarters everywhere from factory floors to the dining, hospitality and travel businesses. That delay will be an insurmountable hurdle.

Pelosi Only Public Voice on This

And the one person in all of government we have heard express this in terms that go to the crux of the matter is none other than Speaker Pelosi. In her Fox News Sunday interview with Chris Wallace she inquired, “Where are the ‘rapid’ tests?” (Once again our additional punctuation)

This is the real point even beyond the per capita deficient US testing that Trump continues to deny: There needs to be sustained, regular, extensive testing, even including the asymptomatic.

The two-week asymptomatic nature of this particular virus was a problem we highlighted as a major market concern from when awareness of that aspect first appeared back in late-January (see our January 27th “The ‘Known Unknown’ Carries the Day” research note for more.)

The only way to address this is the ‘rapid’ tests. Ironically, as we noted last week Tuesday, there seems to be only one place to get a rapid response novel coronavirus test right now: Wuhan.

Sustained US Equities Skepticism (Updated Monday)

And this is why we remain skeptical of US EQUITIES overall, even though they might be able to rally further once they shake off this morning’s Crude Oil shock (more below.) More government programs and central bank largesse might encourage more near-term hope.

Authorized Silver and Sterling Subscribers click ‘Read more…’ (below) to access the balance of the opening discussion. Non-subscribers click the top menu Subscription Echelons & Fees tab to review your options. Authorized Gold and Platinum Subscribers click ‘Read more…’ (below) to also access the Extended Trend Assessment as well.

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