Wow. Up 2% yesterday, down 3% today. Is the world really any different? Was there so much new information? What changed? Well, this morning Target reported numbers even worse than WalMart's disappointment. Really, not a lot has changed. Powell's comments yesterday were not initially thought to be bearish. Did people read them again overnight and somehow get bearish on the second reading of the transcript?

What is going on is 1 step forward, 2 steps back. What is happening is that all investments are still pricey. Bonds are still expensive and don't even cover inflation. Stocks are trading above historical multiples despite the likelihood that we are going into a recession.

Interesting chart that says "Global Tech stocks now at 20x & valued like staples peers." Oh really? NFLX trades at what multiple of zero cash flow? CVNA trades at what multiple of negative EBITDA? More tech stocks have negative cash flow than positive, so that index is just misleading. AAPL, GOOGL, and MSFT all trade at 20X or more, and they dominate the indices. You are not finding any good tech franchises trading at less than 20X, so I don't know how these data scientists are doing their calculations. Maybe they are including duds like PHG and saying its tech. PHG is actually a good indication of what can happen at the bottom. PHG is supposed to earn $1.77 this year, which is 14X earnings. Don't think MSFT or AAPL can trade there? Well, APPL traded at 14X for something like 6 straight years recently. This is one reason why the market isn't confirming any bear bounces. Its a bit far-fetched, but what if nobody bought an iPhone in the third quarter? Would the world stop? Would anyone's lifestyle be diminished if they didn't get that iPhone? We don't know if the economy will worsen from here, but what we can definitively say is that stock prices are not cheap at these levels. Fourteen months ago, when the S&P500 was moving through 3900, absolutely nobody was pounding the table saying "stocks are cheap".

The market is down 11.5% since this analysis from April 30th, but not only are we still not cheap, but we are not even at median valuations:

Today we got 2 calls from companies regarding the votes at annual meetings. Since when do large companies start calling little people to influence shareholder votes? This is not exactly like the cab driver giving Bernard Baruch stock tips, but to get 2 calls in an hour from companies regarding shareholder votes is an indication that management teams are scared. The call with McDonalds was particularly interesting. They said that half of McDonald's shareholders were telling them that they were happy Micky Ds pulled out of Russia, but the other half thought that they were crazy to exchange a large portion of operating income in exchange for nada. They agreed that no owners in Moscow would be pulling down the golden arches and that the oligarchs would just be able to sell thier proprietary recipies without oversight. McDonalds also told us that the embargo on Cuba led to a half century of poverty for their people and didn't solve anything. Not only are management teams scared, but many of them are filled with millenials and they admit to choosing political correctness over maximizing profits. By walking away from Russia, MCD's management enriched Russians at Americans expense. Brilliant.

We will keep publishing technical short term commentary, but traders also have to develop 6 month views and overlay short-term technicals on top of thier longer term analysis. Get flat in May & go away doesn't look so bad right now.

Today's action is telling us that there is a high probability of testing the S&P500's 3850 low range from May 12th:

The chart is also telling us that there are buyers here under 4,000, and in fact Buffett has been adding in a few names.

Given that we are already down 3.4% with over two hours to go, a 4% down day quite possible and if that happens we likely re-test the recent lows. With KO down 6% on their announcement of "attached caps to reduce litter", the market is obviously scared right now and yesterday's risk-on party seems like forever ago.