The Morning Call
10/18/21
The
Market
Technical
The S&P had a rip
roaring Thursday and Friday and appears on its way to challenging its former
high. Historically, November and
December have been good months for stocks.
So, the closer we get to month end without a major Market negative, the
more likely that challenge will prove successful. Helping will be the reversion of the 100 DMA
to support which will happen today in the absence of a major sell off.
Sentiment
indicator points to upside bias.
https://www.zerohedge.com/the-market-ear/chi2m3o2ob
Bulls regain control
of the narrative.
https://www.zerohedge.com/markets/bulls-regain-control-market-fed-taper-looms
November melts up?
https://www.zerohedge.com/markets/why-goldman-expects-huge-market-melt-coming-days
The long bond is
trying to rally though (1) it first has to revert its DMAs from resistance to
support; it could accomplish that with its 200 DMA if it remains above that MA
by the close today and (2) it has to contend with two sizeable gap up opens---which
as you know, I believe will need to be filled.
This positive pin action is likely the result of (1) the upbeat
September retail sales number [stronger economy] and (2) the cooler September
PPI number [less inflation]. The
question, of course, is, do these stats signal a change of direction in the
economy. If so, that would clearly be a
plus for the Market and I would need to make some serious revisions to my
outlook. But first, follow through.
Will rates go lower?
Lacy Hunt says yes due to a weaker economy
https://www.zerohedge.com/markets/lacy-hunt-sticks-his-message-lower-bond-yields-way
NASDAQ decoupling
from rates?
https://www.zerohedge.com/the-market-ear/chzf7gpjp
GLD was actually up on the week but that trip involved
a lot of volatility, including an expecially strong Wednesday and a waterfall
pattern on Friday. You can see how gold
reached both DMA’s as well as the downtrend off its June 2nd high
(which happened to be the upper boundary of its very short term uptrend) and
dive bombed---which would be in line with its historical reaction to the retail
sales/lower PPI data. The good news is
that it remains in uptrends across all timeframes and it has the huge gap down
open to close.
Last week, the
dollar tried for the second time to approach the upper boundary of its very
short term trading range and failed.
However, it is still in an uptrend and well above both DMA’s. A stronger economy and weaker inflation would
historically be good for the dollar. So,
if last Thursday/Friday’s shift in investors’ perspective proves correct, that
should further bolster the dollar.
Friday in the
charts.
Fundamental
Headlines
The
Economy
Review of Last Week
The US data
releases were slightly negative though there was one upbeat primary indicator. So, struggling growth remains my
characterization of the economy now and into the future. Overseas, the numbers were negative,
reversing a two positive trend (two weeks isn’t really a trend)---so, no help
for the US.
September retail
sales was the aforementioned positive primary indicator, though with all the
media headlines about empty store shelves, I have to wonder if (1) those empty
shelves were anticipatory hoarding, bring future sales into September and (2)
those empty shelves don’t bode well for October consumer spending.
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.
US
International
Q3 Chinese GDP
grew 0.2% versus estimates of +0.5%; September YoY industrial production was up
3.1% versus +4.5%; September YoY retail sales rose 4.4% versus +3.3%; September
YoY fixed asset investment was +7.3% versus +7.9%
Other
The
Fed
UK bond yields rise in anticipation of a Bank
of England rate increase.
Inflation
How bad is the energy shock?
https://www.zerohedge.com/the-market-ear/energyshock
Stagflation is a problem.
https://www.zerohedge.com/markets/investors-starting-realize-stagflation-problem
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