The Morning Call
2/1/21
The
Market
Technical
Last week, the
S&P decisively broke a very, very short term uptrend and is now set to
challenge the lower boundary of its short term uptrend. If that is successful, you can see the
multiple support levels below it---both DMA’s and the lower boundary of its
intermediate term uptrend. Technically
speaking, I am not going to get too worried until, as and if it takes out the
200 DMA. That said, what is concerning
is the ‘why’ of this selloff; that is the speculative activity of the Reddit
crowd attacking the institutional shorts.
To be clear, I am not in the least opposed to their effort. Indeed, I am angered by the steps being taken
to shut this process down. However, it has had the effect of creating
liquidity issues among some broker dealers and whenever markets start having liquidity
issues, it is time to be worried about my Portfolio, whatever the merits or
ethics of the Market’s participants. BE
VERY CAREFUL.
https://www.zerohedge.com/markets/how-does-all-end
TLT continues to
act immune to the behavior of the equity market---I expected some kind of rally
in the midst of the turmoil in equities.
Not to be. Bond investors appear
to be more concerned about the threat of rising inflation.
You would never
know that there was any turmoil in the stock market by looking at GLD’s
chart. Last week was a continuation of the
short term trend lower; though as you can see, gold unsuccessfully challenged
both the upper boundary of the downtrend off the August high as well as its 200
DMA. As you can also see, those two
trends are converging and GLD is getting squeezed between. There should be a break one way or the other
this week.
The dollar seems
to be perking up a bit. Not surprising
given the rise in interest rates and the volatility in the stock market. However, it has a lot of resistance to
overcome to establish any kind of change in trend.
Bottom line. The equity market is starting to get a bit
squirrely and that is not usually a positive omen for future performance. On the other hand, with the Fed’s unrelenting
pursuit of QEInfinity and the political class’s passion for throwing money at
anything that walks, talks and has one, it is hard to imagine a significant selloff---unless,
of course, the great unwashed masses finally realize that this insanity can’t
go on. I have no idea what to do accept
keep my head down, i.e., have lots of cash.
Friday
in the charts.
Fundamental
Headlines
The
Economy
Review of the Week
The US datapoints
last week were overwhelmingly positive, although the primary indicators were not (two plus, three
neutral, one negative). Still, I rate
the week a positive. This is the second
plus week in a row and that hopefully indicates that the worst is behind
us. Nonetheless, I do not think that it
augurs for a ‘V’ shaped recovery---just the continuation of a labored effort to
improve.
Overseas, the
stats were neutral. Still no help there.
For the moment, our
base economic scenario remains intact---the US and global economies are
improving but not at the velocity of the initial sharp rebound off the bottom. In other words, a diminishing probability of
a ‘V’ shaped recovery which would lessen any potential inflationary pressures
and leave the Fed free to continue QEInfinity.
Longer term, my
belief is that the economy will grow at a historically subpar secular rate due
to the twin burdens of egregiously irresponsible fiscal and monetary
policies---which continue to become 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
December German retail sales fell 9.6% versus estimates
of down 2.6%; its January
manufacturing PMI was 57.1 versus 57.0.
December EU
unemployment was 8.3%, in line; its January manufacturing PMI was 54.8 versus
54.7.
The January UK
manufacturing PMI was 54.1 versus consensus of 52.9.
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