The Morning Call
3/22/21
The
Market
Technical
Last week, after resetting its short term trend from up to a trading range in early March, the S&P twice tried and failed to recover the lower boundary of its former short term uptrend. While disappointing, you can see that it has plenty of support from both DMA’s before it even attempts to challenge the lower boundary of its new trading range. So, this resetting of its short term trend is more of a loss of upside momentum than a warning bell that more downside is in the offing. My Market assumption remains: ‘while valuations continue to reach historical extremes, I can’t see an end to this uptrend as long as the money keeps flowing with abundance and in the absence of any major negative exogenous event.’
As you can see,
the bond guys have been relentless in their selling over the last two
weeks. The only saving grace is that TLT
challenged the lower boundary of its short term trading range on Thursday and
made a recovery on Friday. Let’s see if
that support level holds. If so, then
the worst will be over. If not, the next
visible support level is the lower boundary of its intermediate term uptrend,
fourteen points ~10% lower. As I have noted previously, the deterioration
of TLT’s chart is about more than technicals.
It is bond investors grappling with the speed and magnitude of a
potential rise in inflation. At the
moment, it appears that the bet is on higher inflation/interest rates.
GLD is not faring
much better than the long bond. The only
difference is that gold was more extended to the upside; so, its retreat hasn’t
even broken its very short term uptrend.
Hence, further weakness seems reasonable especially with interest rates
and the dollar rising. I know that GLD
is supposed to benefit from higher inflation.
But it seems like bitcoin has or is replacing it as a store of value.
https://www.zerohedge.com/the-market-ear/ctv367w7d9
After challenging the
lower boundary of its short term trading range twice and failing, the dollar continues
its slow recovery; even resetting its 100 DMA from resistance to support. This progress is likely a function of the US
being well ahead of most of the world in its coronavirus economic recovery.
Friday in the
charts.
https://www.zerohedge.com/markets/stimmy-hangover-stocks-sink-fed-flubs-bond-bull-market-ends
Fundamental
Headlines
The
Economy
Review of Last Two Weeks
Week of 3/8
It was a slow week
of statistical releases in the US. What
there was, was evenly balanced. So, it
was of little informational significance.
Overseas, the data flow was more
normal; but it too was equally divided between the plus and minus numbers,
meaning that the global economy continues to struggle toward recovery.
Week
of 3/15
It was a rough
week for US data reports; but the really poor numbers reflected the disruptive
weather pattern in February. So, I am
not counting this a negative week.
Overseas witnessed a slight improvement in the overall stat count---a
hopeful sign the rest of the world could be catching up to the US in its rate
of economic improvement. But it is too
soon to make that assumption.
US
The February Chicago
national activity index came in at -1.09 versus +.75 reported in January.
https://www.zerohedge.com/economics/feds-national-activity-index-crashed-february
International
Other
News on Stocks in Our Portfolios
Bottom
line. “If
monetary policy does create economic growth, inflation and sustainable
employment, then why, after more than a decade, is the Fed still having to
support the financial markets?”
https://www.zerohedge.com/markets/cornered-powell-cant-raise-rates-economy-remains-life-support
What
I am reading today
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