Sentiment/Yields/Stocks/Data

I will be taking the next few days off. Have a relaxing long weekend.

According to Investors Intelligence the bullish sentiment continues to get more extreme. Bulls are now at 61.5 from 60 last week, the highest of the year. Anything above 60 is considered rarified air. Bears did tick up to 16.4 from 16.2 but its spread to Bulls of 45.1 is extraordinarily wide. Those expecting a correction are at the least since September 2018. Combine this with the Citi Panic/Euphoria index and it’s clear where the ‘professionals’ have laid their chips, on the Euphoric line. It is certainly working for now and reflected in the parabolic move higher in the NASDAQ. This will really matter at some point but defining ‘at some point’ though is of course the unknown.

As of yesterday’s close, the 30 yr bond yield had given back almost all of the Jay ‘I want higher inflation’ Powell speech. I want to be clear that the inflation I foresee is not because of the Fed, it is in spite of them. It will be supply driven initially and demand driven thereafter. With respect to the Fed and their goal here, they are just repeating every single failed mistake they made by keeping rates at zero for 7 years and multiple rounds of QE that resulted in anemic growth. They are repeating every mistake of the BoJ and ECB that have been in this seemingly forever land of NIRP, massive QE and no yield curve. Lael Brainard yesterday saying the Fed might need to do more is just spouting the same failed policies. I promise, the Fed’s results will be no different with respect to the economy. Their influence on asset prices though, the Fed gets an A+ by scaring money out of the hot potato of zero to little yield bubbles be damned.

With respect to stocks, the SPX will open 15% above its 200 day moving average as of this writing. For reference it got to 14% on January 26th, 2018 during that historic overbought run. This matters only for the short term but reflects how extended we’ve gotten. The NDX then was 17% above its 200 day. Today it is 32% above its 200 day moving average.

Mortgage applications fell for a 3rd straight week. Purchases were down a hair, by .2% w/o/w but are still up 28% y/o/y. While strong y/o/y, applications for purchases have basically flat lined over the past 5 weeks. Refi’s were down for the 4th week in the past 5, down by 3.1% but still up 40% y/o/y. The slowdown in the pace of refi’s begs the question of whether those that could refi with historically low rates already have and for some, it’s tougher to do because of forbearance issues.

The tally on auto sales for August yesterday was 15.2mm at a SAAR vs 14.52mm in July. For perspective it was 16.83mm in January and February and got as high as 17.5mm last year. Robust used car sales has stolen thunder from the new car business and the average price of a used car reflects that.

VEHICLE SALES at SAAR

MANHEIM USED CAR PRICE INDEX