Monday Morning Chartology

 

The Morning Call

 

6/1/21

 

The Market

 

    Technical

 

The S&P successfully challenged its short term uptrend.  However, it was a very weak break.  While the index was up on the week, its rate of ascent was just less than that of the trend---which took it below the lower boundary of the uptrend and left it there.  While this circumstance is not good news, it is questionable whether it is bad news.  So, short term I await more directional information.  Longer term, my premise 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.’            That said the question that the Street now seems to be pondering is, is tapering good news or bad news? 

 

Morgan Stanley sell signal hits an all-time high.

https://www.zerohedge.com/markets/we-took-out-june-2007-highs-morgan-stanleys-sell-signal-just-hit-all-time-high

 

Breadth breaking above range.

https://www.zerohedge.com/the-market-ear/csfzklam5f

 

 

The long bond finished a mostly down week with a smokin’ Friday.  It nevertheless remains stuck in a very short term trading range---it can’t make a new high and has been unable to trade down through that 133 level.  This suggests that the bond investors continue to stew over the issue of tapering being good or bad news.

 

As you can see, GLD investors got caught up in the good news/bad news of tapering uncertainty.  It got hammered on Thursday; then rebounded strongly on Friday.  Given that gold is a much less liquid market, this behavior is not that unusual when ambiguity hits.  That said, the chart remains strong, at least in the short term.

 

The dollar bounced hard off the lower boundary of the short term trading range, successfully challenging the downtrend off its late March high.  So, its investors also joined in the indecisiveness of those of the other indicators. 

http://www.capitalspectator.com/is-the-us-dollar-at-risk-of-losing-reserve-currency-status/

 

 

So, it appears that the bond market has had it right for the last couple of weeks---meaning that ‘uncertainty’ dominates almost all investors, save those of the Reddit crowd, which my guess is only increases the unease of other investors.

 

Friday in the charts.

https://www.zerohedge.com/markets/dollar-bond-yields-plunge-end-meme-orable-week

 

    Fundamental

 

       Headlines

 

              The Economy

 

                        Review of Last Week 

 

US data releases were negative (as were the primary indicators).  That is the fifth week in a row.  So, boys and girls, it looks like we have a trend.  Which in turn likely means that consumers have satisfied all that pent up demand from the lockdown and blown through the free money from the government.  Remember though that I score the stats versus expectations not their absolute level.  So, the numbers are not telling us is that there is no recovery but rather that is not a robust as most analysts believe.  That fits my forecast but is probably proving disappointing to others.  

 

The question is, what does this mean for inflation?  It certainly suggests that any demand or supply driven price increases will ‘transitory’ a la Powell et al.  On the other hand, if inflation is ‘too much money chasing too few goods’ as Friedman postulated, then the Fed is whistling Dixie and we are faced with slow growth and increasing prices.  That seems the most likely scenario to me; but it has yet to become manifest.

https://www.realclearmarkets.com/articles/2021/06/04/why_the_inflation_bogeyman_is_not_yet_imminent_780035.html

 

Overseas, the data flow was mixed with the European data positive and Japanese and Chinese negative.  Of course, that is one week of stats; so, at this point I am not going to make much of it.

 

Bottom line. ‘As you know my opinion is that following an initial snapback (which may already be over), 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

                       

The April Japanese leading economic indicators came in at 105.0 versus 102.4 in March.

 

April German factory orders fell 0.2% versus estimates of +1.0%.

 

The May Chinese trade balance was $45.5 billion versus expectations of $50.5 billion.

 

                        Other

 

                                   An almost upbeat piece from Jeffrey Snider.

                          https://www.realclearmarkets.com/articles/2021/06/04/growing_indications_theres_more_trouble_ahead_780038.html

 

                 Inflation

 

                   Yellen admits inflation is about to rise-----but it is a good thing.

                    https://www.zerohedge.com/markets/yellen-admits-inflation-about-soar-says-it-will-be-plus-society

 

 

         Bottom line.

 

             More on valuation.

             https://www.advisorperspectives.com/dshort/updates/2021/06/04/is-the-market-still-overvalued

 

                 No more long bear markets?

             https://theirrelevantinvestor.com/2021/06/04/no-more-bear-markets/

 

         News on Stocks in Our Portfolios

           

What I am reading today

           

            Quote of the day.

            https://cafehayek.com/2021/06/quotation-of-the-day-3545.html?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+CafeHayek+%28Cafe+Hayek%29

 

           

                The problem with crypto currencies.

            https://www.advisorperspectives.com/commentaries/2021/06/04/a-curse-worse-than-cash

 

                The problem with H.R. 1 (voting rights act).

            https://www.zerohedge.com/political/hr-1-cautionary-tale-unintended-consequences

 

               

 

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