The Morning Call
10/11/21
The
Market
Technical
The S&P had a
good week, successfully challenging its 100 DMA (now support) and trading above
the downtrend off its 9/2 high. That
leaves little resistance between its current level and a challenge of that 9/2
high. That said, Thursday’s gap up open
needs to be filled and would mean some backing and filling before the advance
could take place. With all the recent
volatility, which may continue, it is a good time to do nothing.
Buy protection when you can not when you must.
https://www.zerohedge.com/the-market-ear/vix-hedges
Is the 2021 bear
market over?
https://www.zerohedge.com/markets/great-bear-market-2021-finally-over
The long bond continued
its plunge, reverting its 200 DMA to resistance. It seems pretty clear that the bond guys are
anticipating higher inflation and an end to QE---a scenario that you would
think that the stock guys would not like.
EU rates on the rise.
https://www.zerohedge.com/the-market-ear/cznslcylus
GLD piddled around for the second week in a row. Amidst all the volatility in the stocks and
bonds, I thought that it would spill over into the gold market. That said, there has been a lot of chatter lately
about bitcoin replacing GLD as the go-to store of value; and that may explain
gold’s sleepy behavior as stocks and bonds see saw dramatically. It is something to watch and consider.
The dollar was up
on the week but still closed below the prior Wednesday’s high. The bias is clearly to the upside though the
upper boundary of its very short term trading range (green line) is posing some
resistance.
Historically, a
strong dollar and higher interest rates have not been particularly good for
stocks (corporate earnings). Sooner or
later, something has to give.
Friday in the
charts.
https://www.zerohedge.com/markets/jobs-jolt-dulls-debt-limit-delay-gains-crypto-crude-surge
Fundamental
Headlines
The
Economy
Review of Last Week
The US data
releases were slightly negative while there was one negative and one neutral
primary indicator. So, struggling growth
remains my characterization of the economy.
Overseas, the numbers were slightly positive---for a second week in a
row. A plus to be sure; but the overall
trend is flat to down---so, no help for the US.
The congressional
cat fight over the debt ceiling, funding the government, the $1.5 trillion
infrastructure bill and the $3.5 trillion giveaway to the democratic base
continued. So far, the news is mildly upbeat. The government can remain in business through
December. Joe Manchin remains a hold out
for a smaller giveaway bill ($1.5 trillion).
If it is Washington as usual, he will get ‘bought off’ with some extra
perks for West Virginia (and himself?) and the taxpayer will get saddled with
the ‘compromise’ sum. The only hope is
that the progressives refuse to compromise and nothing passes. Stay tuned.
Bottom line. Following the initial snapback from the
lockdown, the US economy appears headed toward its former subpar secular growth
rate, stymied by an irresponsible mix of fiscal and monetary
policies---unfortunately with the growing risk of nontransitory inflation.
I like Jeffrey
Snider’s work; and I think this article helps explain the lackluster prospects
for economic growth post recovery.
However, with the growing number of headlines on inflation, especially
those on rising wage demands (cost push inflation), I have a tough time
excepting the premise that the lack of bank lending means lower/stagnate
inflationary pressures. Indeed, the lack
of bank lending to say the oil industry could very well lead to shortages and,
hence, higher prices.
US
International
September YoY Japanese
machine tool orders were up 71.9% versus up 85.2% in August.
Other
Inflation
Fertilizer prices hit new high.
China
China’s
energy crisis.
Bottom line
More on valuation.
https://www.advisorperspectives.com/dshort/updates/2021/10/07/is-the-market-still-overvalued
More gloom from Morgan
Stanley.
https://www.zerohedge.com/markets/morgan-stanley-doubles-down-doom-calls-fire-and-ice-correction
And
from SocGen.
https://www.zerohedge.com/markets/albert-edwards-its-starting-feel-bit-july-2008
News on Stocks in Our Portfolios
What
I am reading today
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