The Morning Call
9/6/21
I am leaving on a three week
vacation. I’ll be back September 27th.
The
Market
Technical
Looking at the
S&P’s pin action last week (the index barely moved), you would never know
that the US fled a twenty year war with its tail between its legs or that the
nonfarm payroll number was a major disappointment. On the other hand, the latter likely means
the odds increased of a budget busting
government give away and/or a slowdown in tapering plans---both of which have proven
a plus for stock prices of late. So, my
current short term pin action premise holds: ‘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 said that,
the fact that the Market snoozed its way through the aforementioned headlines
does suggest a great deal of complacency among investors---historically not a
plus for equity prices.
The long bond drifted
lower last week, though it remained well within its very short term trading range
and that developing pennant formation as well as above both DMA’s. Strangely, Friday was down big; exactly the opposite
of what I expected in light of the poor employment report. In last week’s Monday Morning Chartology, I summarized
the prior week’s performance of bonds: ‘This
pattern portrays some uncertainty among bond investors which really isn’t that
surprising given the current goings on in Afghanistan, congress and the Fed. For the moment, I am coloring bond investors
uncertain.’ Ditto.
You may remember
(and you can see in the chart) last Friday’s rocket ride in GLD. It pushed through the downward sloping trend
line off its early June high and challenged both its 100 and 200 DMA’s (both
resistance). At that point, I noted the
key was follow through---which there was none, at least through the following Monday
through Thursday. Then, Friday, there
was another major spike up, again challenging both DMA’s (still resistance);
and simultaneously, the 100 DMA crossed above the 200 DMA---historically a
bullish occurrence. Still the bottom line here is that follow
through is critical, though I would judge that the bias is more to the upside (higher
prices/lower rates) than at the same time last week. Certainly, if the economy is weakening and
rates are dropping, that is bullish for gold.
The dollar is the
only one of my indicators that made a definitive move; and it was lower,
following through with the down trend started in the prior week. It appears poised to challenge both DMA’s (no
support) and, if that is successful, the January/May double bottom. Of course, that is a long way away; but if it
breaks that January/May low, it would be quite negative for stocks. Clearly, it bears watching.
Friday in the charts.
Fundamental
Headlines
The
Economy
Review of Last Week
Last week, total
data releases as well as primary indicators were weighed to the negative. In the mix was a nonfarm payroll number that
was abysmal (the Street is alive with
talk that it was so bad that it could impact Fed policy [tapering] and raise
the odds of passage of Biden’s $3.5 trillion ‘human’ infrastructure give away).
Unfortunately, since
(1) there isn’t any lessening in supply shortages and (2) numerous major companies
are proudly announcing wage increases, (3) if the fallout from the payroll stat
does lead to a delay in tapering and passage of that budget busting
infrastructure legislation, then the probability of a worst case economic scenario
(stagflation) increases. We have to wait
and see how the Fed and congress react to the new data. But the odds of stagflation have likely risen.
Overseas, the numbers
were just awful. So, no help there.
Bottom line. ‘As
you know my opinion is that following an initial snapback (which appears to
be over), the US economy will likely return to its former subpar secular growth
rate, stymied by an irresponsible mix of fiscal/monetary policies.’---which seem ever
more likely in light of the payroll number.
US
International
Other
The Fed
The Fed doesn’t know now what it didn’t know
then.
News on Stocks in Our Portfolios
What
I am reading today
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