The S&P remains in uptrends across all timeframes and above both DMA’s. And it would have to decline over 200 points to challenge the closest support level. This upward bias will most likely continue as long as the Fed and the federal government throw money at the economy. There is really not much more to be said except that I am as nervous as I can be over valuations.
I am presenting the long term chart for the long bond to provide some perspective. We all know that that TLT has been in a downtrend since August. But it has come off what appears to be a blow off top. So, it is not unreasonable to think that prices could continue much lower (rates higher) without breaking any uptrends or approaching its 200 DMA.
After GLD’s gap up open on Monday, breaking out of its downtrend since August, it got hammered on Friday, seemingly pushing it back into the aforementioned downtrend and below its 100 DMA (now support; if it remains there through the close on Tuesday, it will revert to resistance). There needs to be some follow through to assure that Friday’s pin action wasn’t a one off move. If it is not, then GLD would be back in harmony with its inverse relationship with interest rates (i.e., higher rates equal a lower GLD price).
Like TLT and GLD, the dollar has been on the decline since August. The difference between it and the other two is that it is down relatively more. And at the moment, there is nothing to indicate that it will not continue lower. However, given the extent of its fall, it would not be surprising to see some kind of bounce near term---not necessarily a trend reversal but, at least, a countertrend rally.
Friday in the charts.
Review of the Week
The economic data in the US was positive, though the primary indicators were neutral (one each). Still a plus is a plus. And that keeps the trend positive though not overwhelmingly so.
Overseas, the numbers were awful---which is the first really poor showing in some time. However, it is not surprising given the second wave of the coronavirus and subsequent lockdowns and is likely to continue as long as those lockdowns are in effect.
In sum, while the US and global economies are improving, there remains no reason to assume the initial sharp rebound off the bottom will continue. In other words, a diminishing probability of a ‘V’ shaped recovery. More likely a swoosh, ‘W’ or ‘K’.
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.
Morgan Stanley worried about runaway inflation.
Fed vice chair sees no tapering in 2021.
The mythical printing press.
Fed driven rallies always end badly.
Bottom line. What yield on the 10 year Treasury could burst the stock market bubble?
Mohamed El Erian: the markets are reaching dangerous levels.
Markets are in uncharted territory.
News on Stocks in Our Portfolios
What I am reading today
Alien debris discovered.
Quote of the day.
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