The Morning Call
11/30/20
The
Market
Technical
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.
https://www.zerohedge.com/markets/stocks-give-thanks-fed-liquidity-dollar-gold-bitcoin-dumped
Fundamental
Headlines
The
Economy
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.
US
International
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%.
Other
Fiscal
Policy
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.
The
Fed
Looking for inflation in all the wrong places.
https://www.zerohedge.com/economics/two-inflationary-tail-risks-us-investors
Latest FOMC minutes. Dissention in the ranks?
https://www.zerohedge.com/economics/fomc-minutes-show-fed-split-over-asset-purchase-plans
The
coronavirus
Second company applies for rapid approval of
vaccine.
https://www.zerohedge.com/geopolitical/moderna-applies-emergency-covid-vaccine-approval-us-europe
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