The Morning Call
8/16/21
The
Market
Technical
In last week’s
Monday Morning Chartology in described how the S&P was in the process of
yet another rolling challenge of its short term uptrend. During that week, it successfully reset to a
new short term uptrend, the net effect of which is to lower its rate of ascent.
As I noted, the cause of these multiple challenges/resets is the slowing
of the upward momentum of the S&P index.
‘That is not necessarily a bad thing.
Most likely, it just means that the buyers are getting exhausted and
some consolidation is order.’ That notwithstanding,
my current short term pin action premise remains unchanged: ‘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.’
A momentum market
better than 2013 and 2017.
https://sentimentrader.com/blog/a-momo-market-even-better-than-2013-and-2017/
Traders are
starting to bet on a slow (no) economic recovery.
https://www.zerohedge.com/markets/traders-are-suddenly-betting-heavily-imminent-fed-policy-error
Last week, the long
bond initially continued the downward movement started the prior Friday with a
big gap down open. Then on last Friday,
it made a major reversal. (1) not enough
to negate the break of the uptrend off its May low, (2) but also not enough to
even begin to start to close the previous Friday’s gap down open---which as you
know, I believe will get filled, (3) although it was enough to negate the
resetting of the 200 DMA from support to resistance. All this volatility makes me cautious about a
directional call, especially since I am becoming increasingly conflicted about
the course of inflation. So, I will
demure.
Speaking of
volatility, GLD is bouncing around like Bugs Bunny on crack. Last week, there were multiple gap opens in
both directions. Indeed, only one
trading day in the last six did not experience one. Longer term, we know GLD is in uptrends across
all timeframes; but it is also below both DMA’s (now resistance). So, again I am going to pass on making a directional
call.
The dollar
experienced the same kind of volatility as TLT and GLD, but just not in the
same order of magnitude.
The volatility in
all the indices suggests some wild swings in sentiment among investors. That is not surprising given (1) the more
hawkish tone of several Fed speakers, (2) at the same time that the economic stats
are pointing to slower growth, amidst (3)
the conflicting inflation data and (4) the inconsistencies in the reporting,
opinions of the experts and narrative coming out of Washington. It is a good time to do nothing.
Friday in the charts.
Fundamental
Headlines
The
Economy
Review of Last Week
The data releases
last week were heavily negative though there were no primary indicators. So, the stats continue to confirm that the
post Covid burst of economic activity is slowing.
The most confusing
numbers were the inflation reports (CPI pointing to ‘transitory’ inflation
while PPI ran very hot). As you know, my
forecast calls for a decline in the rate of economic growth which would suggest
low (er) inflation. To date I have been somewhat
skeptical of that notion based on the Fed’s wildly expansive monetary
policy. My fear being that we get both a
slowing economy and rising inflation (stagflation).
This piece by
Jeffery Snider makes a case that my concerns are unfounded.
But my favorite
optimist doesn’t agree.
http://scottgrannis.blogspot.com/2021/08/on-beach.html
In other economic
news, the senate passed the infrastructure bill. As you know, I regard infrastructure spending
a plus (as long as it isn’t for ‘bridges to nowhere’). So, I rate this as a modest plus. On the other hand, the $3.5 trillion budget
bill now working its way through the senate is a disaster, exacerbating the stagnating
of economic growth caused by too much debt relative to GDP.
Overseas, the numbers
were also very negative.
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 an irresponsible mix of fiscal/monetary policies.’
US
The August NY Fed
manufacturing index came in at 18.3 versus consensus of 29.0.
International
June Japanese industrial
production was up 6.5% versus estimates of +6.2%; Q2 GDP rose 0.3% versus
+0.2%; Q2 capital expenditures were +1.7%, in line; the Q2 price index showed a
decline of 0.7% versus -0.1% in Q1.
July Chinese YoY
industrial production increased 6.4% versus expectations of 7.8%; YoY retail
sales were +8.5% versus +11.5%; YoY fixed asset investment was +10.3% versus
+11.3%; the unemployment rate was 5.1% versus 5.0% in June,
Other
China
port shutdown raises fears of closures worldwide.
The long term impact of the end of Bretton
Woods.
A sudden change in the consumer sentiment.
The Fed
The
debate is now turning to when rather than if tapering begins.
The
coronavirus
One source thinks the delta variant will peak
within two weeks.
https://www.zerohedge.com/covid-19/morgan-stanley-delta-wave-will-peak-1-2-weeks
The head of the
original WHO investigation of the Wuhan lab admits that China told them what to
write.
This expert says stop mass vaccinations immediately.
But out political
class knows better.
Afghanistan
Another failure (must read).
https://www.zerohedge.com/geopolitical/can-they-learn-us-wargames-consistently-predicted-defeat
Bottom line
Wall Street the most bullish in 20 years.
https://www.zerohedge.com/markets/main-street-confidence-crashes-wall-street-most-bullish-20-years
News on Stocks in Our Portfolios
FedEx (NYSE:FDX) declares $0.75/share
quarterly dividend, in line with previous.
3M (NYSE:MMM) declares $1.48/share
quarterly dividend, in line with previous.
What
I am reading today
Why the secrecy
over the JFK records?
https://www.zerohedge.com/political/why-nara-secrecy-over-secret-jfk-records
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