The Morning Call
3/8/21
The
Market
Technical
The S&P see
sawed last week. First, recovering on
Monday back above the lower boundary of its short term uptrend which it broke the
previous Thursday. Then, breaking this
trend line again on Wednesday and confirming that break on Friday---despite
that day’s positive pin action. That
resets the short term trend to a trading range.
It also marks the 100 DMA (red line) as nearest support level---which is
about 160 points lower.
Two points: (1)
just because the nearest visible support is 160 points lower does not mean that
the S&P will trade that low. It just
defines the near term risk. (2) breaking
a short term trend is not a catastrophic occurrence. The S&P needs to push through more
support levels before getting beared up.
All considered, 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.’
Is the rotation to
cyclicals over?
https://www.zerohedge.com/the-market-ear/there
Like the S&P,
the long bond re-challenged its nearest support level (lower boundary of its
very short term trading range) and like the S&P was successful on its
second try. That trend is now
voided. Nearest support is the lower boundary
of its short term trading range---about three points lower. As I noted last week, 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. It appears that the bet is on
higher inflation/interest rates.
A buy signal in
bonds.
https://www.zerohedge.com/markets/hickman-signal-buy-30-year-bonds
GLD continues its
downward move; there is no visible support until it reaches the lower boundary
of its very short term uptrend (the upward slopping green line) and that is 10%
below current levels. However, remember,
GLD got overextended to the upside and can fall a good deal before any longer
term technical damage is done. That
said, with interest rates and the dollar rising, weak gold is not surprising.
The dollar found
some life last week. It continued the
rally off the lower boundary of its short term trading range and pushed through
its 100 DMA (if it remains there through the close today, it will revert to
support). Clearly , this supports the
thesis that the dollar has made a bottom.
Somewhat confusingly, a strong dollar tends to push inflation low
Friday
in the charts.
https://www.zerohedge.com/markets/bonds-stocks-battered-week-investors-threw-powell
Fundamental
Headlines
The
Economy
Review of the Week
The US data last
week was positive, including the primary indicators. So, it appears that the recovery is well
underway. The news media are describing
in much more upbeat terms than I think that the numbers justify. Don’t get me wrong. The rebound is clearly happening and with
some vigor. But not with the magnitude
implied by the verbiage.
I still believe
that the economy is carrying two heavy anchors (irresponsible fiscal and
monetary policies) that will prevent it from closing the output gap and that
once this growth spurt runs its course, it will resume its below average long
term secular growth rate.
I also remain
unsure about whether or not inflation can occur while there remains a
significant output gap. That said,
Milton Friedman’s thesis that inflation is anywhere and everywhere a monetary
phenomenon is about to get a severe testing. And if you believe the current message from
the bond market (i.e., lower prices) that thesis will be proven correct.
Overseas, the
stats were negative---again illustrating that the US is ahead of most of the
rest of the world in its post coronavirus recovery.
US
International
The January Japanese
preliminary leading economic indicators index was 99.1 versus 97.7 in December.
January German
industrial production fell 2.5% versus estimates of +0.2%.
Other
Higher inflation is in our future.
https://www.zerohedge.com/economics/super-fast-commodity-price-cycle-harbinger-sudden-jump-inflation
Bottom line.
(Too many) things are broken.
https://www.zerohedge.com/markets/mauldin-everything-broken
David Tepper ‘balls to the wall’ bullish.
News on Stocks in Our Portfolios
Medtronic (NYSE:MDT) declares
$0.58/share quarterly dividend, in line with previous.
What
I am reading today
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