The Morning Call
10/12/20
The
Market
Technical
The
S&P continues to work its way back towards a challenge of its all-time high. It appears that investors are in one of those
moods in which formally bad news is now good news. As long as that mindset remains, the short
term bias to the Market is up. And as I repeatedly
note, as long as investors believe that QEInfinity/Forever is a good thing for
the Market, its long term bias is up---at least until QE ends.
While
it is too early to tell, the long bond may be signaling a directional change. It has successfully challenged its 100 DMA
(now resistance) and is now in position to challenge its 200 DMA (now support);
which if successful would likely be followed by a challenge of the lower boundary
of its very short term uptrend. Still,
it will likely take some heavy lifting to just get through those levels of
support. Plus, it has those two major
gap down opens overhead that need to be filled.
So, the call for the moment remains for lower interest rates but with
the caveat that I wouldn’t be betting any money on it.
Gold
made a big move on Friday, breaking above the downward trend of lower
highs. If it can hold above that trend
and begin developing a new series of higher lows, that would suggest investor
concern about higher inflation (higher interest rates) or a need for safety or
both. But we need watch GLD in
conjunction with the behavior of the long bond and the dollar to get
confirmation of investor sentiment.
https://www.zerohedge.com/markets/gold-soars-above-1900-usdollar-plunges
For about six months the dollar traded in a short
term downtrend, then unsuccessfully challenged the lower boundary of its
intermediate term uptrend (purple line) and subsequently reset the short term
downtrend to a trading range. All a plus
for the long term trend of a gradually strengthening dollar. However, on Friday, it broke the newly
developing short term trend of higher lows; and may now be preparing for
another challenge of the lower boundary of its intermediate term uptrend.
The
bottom line here is that GLD, TLT, UUP all a testing support/resistance level
which, if successful, would mark a change in investor assumptions about the
direction of the economy. Importantly, we
can’t assume anything yet. But we need
to be alert that a change may be in the offing.
Friday in the charts.
Fundamental
Headlines
The
Economy
Last Week in Review
Last week was
a slow one for statistical releases in the US.
What we got was basically mixed; so, nothing of informational
value. But the fact that the data was
not upbeat, however skimpy fits with the current pattern of economic improvement
but not in the ‘V’ shape that is hoped for. That said, the economy might get
some help from our political class which seems to be working its way toward
some kind of a second stimulus bill. We
can only hope.
Overseas, the
indicators were again overwhelmingly positive; that makes two weeks in a row of
markedly upbeat numbers---which hopefully presages an improvement of the current
the pattern of irregular growth. Again,
we can only hope.
Whatever the
shape of the recovery, I am not altering my belief that long term the economy
will grow at a historically subpar secular rate due to the twin burdens of
egregiously irresponsible fiscal and monetary policies---which, by the way, are
becoming even more egregiously irresponsible as a result of measures being
taken by the government and the Fed in dealing with the current crisis.
US
International
August Japanese
machinery orders were up 0.2% versus estimates of -1.0%; September PPI was
-0.2% versus 0%.
Other
Depression?
https://www.zerohedge.com/personal-finance/rosenberg-we-are-depression
Q4 GDP contraction likely in EU.
https://www.zerohedge.com/markets/q4-gdp-contraction-will-soon-become-base-case-europe
The
Fed
The demand for money and other considerations
(must read).
http://scottgrannis.blogspot.com/2020/10/on-demand-for-money-and-other.html
Fiscal
Policy
The airlines shouldn’t and needn’t be bailed
out.
The coronavirus
Former head of FDA says no need for a
lockdown.
Bottom line. The financial
industry is doing it again.
https://www.aier.org/article/woke-financial-crisis-part-deux/
The latest from Jim Bianco.
https://themarket.ch/interview/inflation-will-be-a-game-changer-ld.2824
News on Stocks in Our Portfolios
Scotia Bank: a 6.4% yield retirees can trust.
Altria: MO money yields 8.5%.
What
I am reading today
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