We have seen this movie before or perhaps this is just another bad sequel as markets move from risk-on to risk-off and the flight to quality bid returns to bonds. The rush of money isn’t to the USD but to the EUR as that PMI flash report inspired many to think that Europe can grow at 1% this year and that the ECB won’t be able to ease as promised. The Asian markets were hit by China PMI and by a weaker Australian 1Q CPI – both suggest that growth in the region will be less than hoped. This leaves the market waiting for more from the US and the risk is that the news just isn’t sufficient to make the movie plot any better. The earnings reports and the ongoing M/A stories are not likely to be enough. The bubble fears in tech are back on the rise and those companies will be the center of attention. The US housing story remains in doubt with the AIA billings index back below growth and flashing more questions about companies Capex. No one should be happy about the show today and that leaves us with the risk of stale popcorn and worse sequels to come

The El Nino risk for the US was moved up to over 50% in the summer by the NOAA climate prediction center in its monthly report yesterday. This matters because the last time El Nino hit the US in a big way 1997-1998 it cost the US $25bn – and the disruption to food and other commodities was felt globally. The storm risks matter and become a part of the risk profile for global macro investors. They also become convenient metaphors for the present low volume rally up in risk assets. The slow heating up of equities brought a US shares to near records again. There were plenty of people pointing out that buying shares on a Tuesday is a big story for 2014. This anamoly works – but there aren’t a lot of logical explanations. As for the data, there was a lot of it today and not entirely supportive with existing home sales lower – slightly better than expected but weaker – and prices still rose with 10% of sales still all about foreclosures. The Richmond Fed Manufacturing Survey was like the Philly Fed – better and suggests the April bounce back in US ISM will be significant. The bigger market stories were in earnings and in the 2Y auction which showed a bit of fraying in demand leading to a softer than hoped auction and raising the stakes for the 5Y and 7Y auctions ahead. The see-saw relationship of rates to equities is returning – and that isn’t necessarily inspiring for a good forecast ahead. In fact the more the markets move up with low conviction the more the bears become animated in warning that a storm is a brewing. But predictions of weather and markets are best left to the seers. Maybe we are in the second tech bubble – like Einhorn suggests, maybe its different. In the meantime, the facts and the tape speak for themselves. 6 days up for the S&P500 - near historic highs and up 1.7% on the year to date.

As financial technology evolves at an ever-increasing rate, new software vendors spring up like dandelions in summer. At the same time, existing providers take advantage of opportunities to expand into new verticals. While this undoubtedly helps move the industry forward, it clearly adds an unnecessary element of risk, as a multitude of unproven systems tout themselves as practical solutions.

The following is excerpted from a recent Asbury Research presentation. • Near term, the S&P 500 is at a key inflection point from which its 2013 advance must aggressively resume if still intact. • More intermediate term, extremes in investor sentiment and 56 years of seasonality data warn of a 2nd Quarter US broad market correction. • Corrections aside, intermarket relationships suggest that there is at least an additional 11% in the 2013 US broad market advance before a more sustainable peak may emerge. • Our work suggests an upcoming rise in both long dated US Treasuries and gold prices, which also indirectly support a 2nd Quarter US stock market correction. • The Energy Sector is poised to outperform during the 2nd Quarter, and Health Care is vulnerable to relative underperformance during this period.