I Might Be the Best Armchair Quarterback in History

Equities start the day lower as apparently someone built a wall at 2,100. Trump, the Nights Watch, members of the Qin Dynasty, Hadrian’s legions, I don’t know… some of those or all of those must’ve been involved because we can’t get thru 2,100 for the life of us. Now there’s a few reasons why we can’t get but the most important of them is this: sentiment peters out around these levels. We keep seeing the same thing over and over again: market acts weak, sells off to 2,075 or 2,050, sentiment gets sour as a patch of kids, the market reverses, everyone gets caught offsides, and we rip back to 2,100. The problem is there’s nothing to take us past there. Macro won’t do it, it’s consistently tepid. Earnings haven’t even tried because they are too busy contracting. Then we get big picture stuff like Brexit or a Fed Hike that halt everyone in their tracks because who wants to stand in front of one of those trains? I mean at this point why even bother? Why not miss the next 20-30 points and just buy the breakout instead? I would but I don’t run money, I just sit here typing hoping someone will listen. Heck, I might be the best armchair quarterback in history! Anyway, here we sit waiting for a reason to go higher while two massive events loom in the distance. Anyone think we’ll remain here until those two get resolved? Does a bear… oh forget it.

After the open the open we retreated from the Wall for all of 15 minutes before clawing our way back to 2,100. Oil was lower overnight until a story came out that OPEC May Consider New Oil Output ceiling at Thursday’s meeting”. So wait...hold on…let me get this straight. Oil at $25, pump it like it’s hot. Oil at $50 and it’s time for a production cap? I mean what levered long 3x oil futures and options fund came up with this headline? Ugh. Anyway, oil rallied and it brought the market higher with it. Couple macro data points in the morning: ISM manufacturing in the low 50s, Markit Manufacturing PMI in the low 50s, and Construction spending slightly lower. Nothing at ALL there to talk about, same as it ever was. What we do need to talk about though is EQR (we rate Neutral). EQR is an apartment REIT that just so happened to have warned us about “falling rents in NYC and SF” and that warning managed to knock 4% off the stock price. Let’s break this down shall we because there might be more to this story than we think. My initial thought was that both a Wall St slowdown and a Tech bubble slowdown were the primary culprits but that’s probably only scratching the surface. Recall that the BIG theme lately has been “everyone will rent going forward because housing sucks” oh and Millennials hate owning things. Builders have been cranking out multifamily dwellings to play this but what if we just saw the top? What if this whole thing was a fad and people do indeed hate renting forever and actually want a home at some point? Way too much apartment supply + a potential fad + demographic bulge + easing lending standards (recall both Chase and WFC are offering 3% down mortgages) + a hatred of doing laundry with quarters and doesn’t housing all of a sudden seem a bit more interesting? If you are HD or FBHS or LOW or SHW aren’t you licking your chops? Anyway, by lunch we sat on unchanged because 2,100 is the new magnet.

We got the Fed’s Beige Book in the afternoon and while it had a somewhat subdued tone to it that’s not going to stop them from raising rates in June or July. We closed at 2,099 after starting the day at 2,085 so I guess that’s a win. We get a smattering of data tomorrow and one last jobs report before a potential hike on Friday so I imagine the market will be fairly sideways before then. Maybe people are just waiting for clarity before buying? That’s my absolute favorite “useless phrases” you hear ALL the time. Clarity…as if such a thing even exists. Yep, I’m in the prediction business but I need to be sure before making a call. Hilarious. Final Score: Dow +1bps, S&P500 +11bps, Nasdaq +8bps, Rus2k +71bps.  

Volume was slightly below avg. Our desk was evenly matched. Buying in Tech and Industrials. Selling in Energy and Software. Shorting in Energy. News Highlights:

Tonight we are going to end with the worst back flip in the history of back flips. No one fails this hard (and typically lives I guess?)


Have a good night