from Alex Barrow 🪶 | by Alex Barrow 🪶

Sentiment and positioning remain very depressed. Last week’s SIVB freakout likely marks a near-term low. Market internals (Cyc vs Def, Semis v SPX, etc.) are not leading to the downside. They’re either leading up or trading in line with the market. That’s not bearish... 1/ t.co/MZwWNwyo1s

2/ The Russell chart is broken because of the knee-jerk reaction in financials last week following the SIVB news. It’ll be important to see if IWM can retrace that damage this week. But Qs and SPX remain constructive as long as they can hold their current levels. t.co/LcJwrLLzvI

3/ Anecdotally, last week I started receiving texts and calls asking about a potential market crash from friends I don’t normally talk markets with. It seems to me that the bearish hysteria doesn’t quite match the tape.

4/ The SPX’s operating cash flows trail profits by the “most on record.” BBG’s Lu Wang points out that “income at SPX companies, adjusted for amortization and depreciation, topped cash flows from operations by 14% in the year through September…

5/ ...In other words, for every dollar of profits, only 88 cents was matched by cash inflows, the largest discrepancy since at least 1990.” t.co/yiVBoUfCVJ

6/ The spread between BBB credit and equities is now positive with the SPX sporting an earnings yield of 5.4% compared to that of IG bonds which yield 5.7% on average. t.co/9yNRD6bUbk

7/ Our macro environment can be summed up as thus: aggregate US valuation metrics in 88th percentile + resilient US economy forcing an aggressive Fed to stay aggressive + deteriorating fundamentals = a recessionary hard landing later this year

8/ The hard landing will be due to monpol lags and the positive feedback loop of the labor market unwinding. This is why we remain long-term bears even though we currently lean bullish over the short-term. t.co/sOMNIPYvOX

9/ We dig deeper into current economic readings, European stocks, and commodities in the latest Dirty Dozen chart pack: t.co/fKNRLZn7WA