The Morning Call
12/14/20
The
Market
Technical
The
S&P experienced a very minor hiccup last week, breaking a very, very short
term uptrend. Given the extent to which the
Market is stretched not only fundamentally but also technically to the upside,
some consolidation is not surprising.
Indeed, I am surprised that the retreat so far has been as minimal as it
has been. So, I expect more downside. However, my position remains that as long as QEInfinityForever
is operative or until investors lose faith in the Fed, the trend is up.
https://www.zerohedge.com/markets/irrational-exuberance-bulls-remain-control
Last
week, the long bond reset its short term trend from up to a trading range; but
then quickly recovered above the former lower boundary of that uptrend. So, the question is, which move is the
outlier? the reset of the short term trend or the subsequent resurgence? That is more than just a technical
question. As you know, I spent some time
and ink last week speculating whether or not TLT’s technical breakdown was a
signal that inflation/higher rates (and all that could mean for stocks, gold
and the dollar) were in our future. The
question is, was that all much ado about nothing? I don’t know.
Stay tuned.
https://sentimentrader.com/blog/interest-rates-turn-golden/
The probability of stagflation is rising.
https://www.zerohedge.com/markets/probability-stagflation-rising
A hint to the above uncertainty is the performance
of the dollar. It continues to get
hammered---which suggests concern about inflation.
On the other hand,
a declining dollar should be pushing gold prices higher. But it hasn’t, at least for the last four
months. Of course, longer term, GLD
remains in uptrends across all timeframes and above both DMA. Nonetheless, this chart contributes to my
underlying uncertainty surrounding inflation and interest rates.
Friday in the charts.
https://www.zerohedge.com/markets/dow-clings-30k-amid-ipopalooza-bonds-rally-brexit-bailout-busts
Fundamental
Headlines
The
Economy
Review of last week
The stats
were negative, breaking a three week positive trend. But there were no primary indicators reported.
However, odds of it being an outlier are small given the considerable uncertainty
over a stimulus bill and the proliferation
of holiday lockdowns.
http://www.capitalspectator.com/us-economic-recovery-at-risk-as-coronavirus-rages/
The latest Q4
nowcasts.
https://www.calculatedriskblog.com/2020/12/q4-gdp-forecasts.html
Overseas, the
indicators were again very positive and for a third week in a row. But we need more consistency in the trend of
the data to start getting upbeat.
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 EU
industrial production was up 2.1% versus estimates of +2.0%.
November German
PPI came in at +0.1%, in line.
Other
48% of small
businesses fear that they may have to shut down permanently.
The Fed
Central banks are creating a Frankenbull
market.
93% of global
economies are contracting and stocks are at all time highs.
Bottom
line. Remaining disciplined in a volatile market.
https://www.pragcap.com/the-psychology-of-the-stock-market-in-one-image/
News on Stocks in Our Portfolios
AT&T (NYSE:T) declares
$0.52/share quarterly dividend, in line with previous.
Medtronic (NYSE:MDT) declares
$0.58/share quarterly dividend, in line with previous.
What
I am reading today
Quote of the
day.
Quotation
of the Day... - Cafe Hayek
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