The S&P is on the verge of negating its former all-time high. In fact, if it remains above that boundary through the close today, it will do so. And since this is the all-time high, there is no resistance between its current price and the upper boundary of its intermediate term uptrend which is almost 1000 points higher. I am not suggesting that we are in for a run to this level, just that there is nothing currently visible that would inhibit it.
The long bond appears to be trying to halt its decline off its all-time high. It bounced off that level three times and subsequently reset both DMA from support to resistance. However, it failed to successfully challenge the lower boundary of its very short term uptrend. The most reasonable interpretation is that TLT became slightly overextended to the upside, met resistance that it couldn’t overcome and is settling back within its major trends---meaning rates are still headed lower.
Gold has clearly lost upward momentum. It has reset its 100 DMA to resistance and is now challenging its 200 DMA (now support; if it remains there through the close on Wednesday, it will also revert to resistance). Still, it has yet to challenge any of its uptrends. Indeed, it would have to decline an additional 15% before it would test even its very short term uptrend. So, at the moment, all we can say is that GLD got extremely overextended to the upside and is correcting back to its major trends---but that process has been and may continue to be painful.
Like TLT and GLD, the dollar bounced off of a high, resetting its DMA to resistance in the process. However, it is now challenging the lower boundary of its short term trading range (if it remains there through the close on Wednesday, it will reset to a downtrend) and is a short hair away from a challenge of its intermediate term uptrend.
So, it appears that the risk on trade in equities has been accompanied by a risk off trade in safe havens like gold, bonds and the dollar.
Friday in the charts.
Review of last week
The stats were upbeat for the second week in a row---although the primary indicators were evenly split. If this trend continues for a couple more weeks, then odds of a follow through to the third quarter rebound improve. Unfortunately, there remains considerable uncertainty over a stimulus bill anytime soon and lockdowns are proliferating in the holidays.
Overseas, while the indicators were very positive, there has been no consistency in the trend of the data. And with renewed lockdowns occurring across Europe, there does not seem much hope of improvement. Not helpful to our own recovery.
Whatever the shape or magnitude of the near term bounce back, 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.
October YoY Japanese housing starts fell 8.3% versus estimates of down 9.3%; construction orders were -0.1% versus -9.0%.
November preliminary German CPI was -0.8% versus consensus of -0.7%.
The economy got a boost with the announcement of Janet Yellen as Secretary of the Treasury to be. As we know all too well from experience, she is a major dove; in this case, meaning she will likely be focused on working hand in glove with the Fed to keep the economy well stimulated. The size of the deficit and national debt will not likely be in her top ten concerns. At the outset, this should keep the economy well oiled with money. But it does carry the risk of hastening the arrival of inflation. When, as and if that happens, the QE regime of the past decade could end and with it, the current overvaluation of equities.
But for the moment, that is tomorrow’s story. Today’s is liquidity driven asset prices.
2021 liquidity supernova.
Looking for inflation in all the wrong places.
Latest FOMC minutes. Dissention in the ranks?
Second company applies for rapid approval of vaccine.
News on Stocks in Our Portfolios
What I am reading today
Quote of the day.
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