The Morning Call
5/10/21
The
Market
Technical
The S&P
started the week on its back foot but ended strong---seeming to regain the
upward momentum that it lost three weeks ago.
Which, as I keep pointing out, would not be surprising given (1) the Fed’s
drive to QE Infinity and beyond and (2) Uncle Joe’s goal of dishing out money
to every man, woman, child, dog, cat and lizard in the reasonable proximity of
the US. So, my bottom line remains: Notwithstanding deteriorating technicals and
nosebleed valuations, my Market assumption remains: ‘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.’
Having successfully
challenged the uptrend off the March 18 low, TLT attempted a rebound last week but
was unable to push through its prior high, lending weight to the notion that it
might test that 3/18 low. That doesn’t
fit my longer term forecast of weak secular economic growth but does reflect
investors’ growing concern that inflation is on the rise as a result of explosive
monetary growth and unprecedented fiscal stimulus. I am still not altering my outlook, but I am
finding the counter argument increasingly persuasive.
GLD had a big up week,
reestablishing a very short term uptrend and breaking above its 100 DMA (now
resistance; if it remains there through the close today, it will revert to
support). That puts it in tune with TLT’s
pin action last week and the ‘higher inflation’ scenario.
The dollar got
whacked late in the week and now appears ready to challenge its early January
low. If successful, the next visible
support exists at the lower boundary of its intermediate term trading range. Its price action suggests investor concern
about higher relative inflation or lower relative economic growth (or both) in
the US versus the rest of the globe.
Friday in the
charts.
https://www.zerohedge.com/markets/gold-surges-best-week-6-months-crypto-soars-dollar-crashes
Fundamental
Headlines
The
Economy
Review of Last Week
US statistical
releases were downbeat last week with the primary indicators weighing three to
one on the negative side. It could be
nothing more than just overly enthusiastic coronavirus recovery forecasts. Because it was not a matter of the numbers
being negative or (in most cases) not showing substantial improvement; it was a
function of them not meeting expectations. I qualified that last statement because one
stat---April nonfarm payrolls---showed a huge shortfall from estimates. And that is a big important datapoint.
Of course, this is
only one week’s numbers. So, it is way
too soon to start claiming that my forecast is becoming manifest. But clearly, it could be an early sign.
Overseas, the data
flow was again positive side, in fact, extremely so. That is two in a row; so maybe the rest of
the world is starting to catch up to the US.
I need a bit longer trend to be
convinced of that.
Bottom line. ‘As
you know my opinion is that following an initial snapback, the US economy will
likely return to its former subpar secular growth rate, stymied by
irresponsible mix of fiscal/monetary policies.’---which are only getting
more irresponsible.
US
International
Other
The Fed
Explain again how
making the 1% richer creates more jobs (must read).
Bottom line. Are we entering a mid-cycle transition?
News on Stocks in Our Portfolios
Illinois Tool
Works (NYSE:ITW) declares $1.14/share quarterly dividend,
in line with previous.
What
I am reading today
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