The Morning Call
6/1/21
The
Market
Technical
As you can see, after
two unsuccessful challenges of the lower boundary of its short term uptrend,
the S&P has hugged that boundary ever since. The good news is that it has not attempted another
challenge. The bad news is that it is
struggling to make headway. Stay tuned for
more directional information. In the meantime, 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?
Here is the
argument for it being good news.
The long bond 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 have
been stewing over the issue of tapering being good or bad news for at least a
couple of months.
GLD investors don’t
appear to be suffering from the same uncertainty as the boys in bond and stock
land---though this is a much less liquid market so I would not call it a great
indicator. That said, the chart remains
strong. Gold is having some difficulty pushing
through the upper boundary of its very short term uptrend; but that is to be expected.
https://www.zerohedge.com/the-market-ear/cc5dgdwykz
The dollar’s pin
action on Friday could possibly be a telling signal. As you can see, it tried to push above that
short term downtrend off its March high but fell back. If it goes on and successfully challenges the
24 level (lower boundary of the short term trading range), it will reset the
short term trend to down and would also be a sign that dollar investors are betting
on either a weaker economy or higher inflation or both.
As a final note, I
believe that the pin action in the long bond is a better predictor of future
economic activity than either gold or the dollar. Meaning in this case, I will go with the
uncertainty in the TLT chart.
Friday in the
charts.
https://www.zerohedge.com/markets/bullion-best-may-tech-wrecks-bitcoins-biggest-bust-decade
This week’s retail
investor money inflow showed a large addition to cash funds.
Fundamental
Headlines
The
Economy
Review of Last Week
US statistical
releases were negative (the primary indicators were neutral) for the fourth
week in a row. This is starting to look
like a trend. If so, it suggests that
consumers have satisfied all that pent up demand from the lockdown and blown
through the free money from the government.
That would be very disappointing to a lot of analysts. On the other hand, a weaker economy may reduce
inflationary pressures and make inflation a lot more ‘transitory’ than even the
Fed has forecast.
Overseas, the data
flow was meager but what there was, was upbeat.
And that follows four positive weeks. So, the rest of the world is definitely
catching up to the US.
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
April Japanese
industrial production was +2.8 versus estimates of +4.1%; April YoY housing
starts were +7.1% versus +3.5%; April retail sales fell 4.5% versus +1.2% in
March; April YoY construction orders were up 3.3% versus +12.5% in March; May consumer confidence was 34.1 versus 34.7 in April; the final May
manufacturing PMI was 53.0 versus 53.6 in April.
The April German unemployment
rate was 4.4% versus 4.5% in March; May German CPI was +0.5% versus predictions
of +0.3%; the final German manufacturing PMI was 64.4 versus 64.0.
The April EU
unemployment rate was 8.0% versus forecasts of 8.1%; the May final
manufacturing PMI was 63.1 versus 62.8; the May flash CPI was +0.3% versus
+0.6% in April.
The final May UK manufacturing
PMI was 65.6 versus consensus of 66.1.
Inflation
A new inflation index.
http://www.capitalspectator.com/introducing-a-new-inflation-index-for-monitoring-price-trends/
The soaring cost of breakfast.
https://www.ft.com/content/007bd0a0-f149-427d-937c-ec5b0ef4374d
The May jump in rents is the biggest on
record.
https://www.zerohedge.com/economics/and-now-prices-are-really-soaring-may-rent-jump-biggest-record
High inflation is back.
https://www.zerohedge.com/economics/worst-kept-secret-america-high-inflation-back
Could core CPI hit
4%?
https://www.zerohedge.com/markets/absolute-shocker-core-cpi-hit-4-two-weeks
Bottom line.
How to do ‘long term’.
https://www.collaborativefund.com/blog/how-to-do-long-term/
Bear markets
matter more than you think.
https://www.zerohedge.com/markets/bear-markets-matter-more-you-think-part-2
News on Stocks in Our Portfolios
Bank of Nova Scotia (NYSE:BNS): FQ2 Non-GAAP EPS of C$1.90 beats by C$0.14; GAAP EPS
of C$1.88 beats by C$0.16.
Revenue
of C$7.74B (-2.8% Y/Y) misses by C$120M.
What
I am reading today
Quote
of the day.
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