The Morning Call
12/6/21
The
Market
Technical
Another
rough week in stock land. The S&P reset its short term trend from up to a
trading range. It also appears ready to challenge its 100 DMA. However, as I
noted last week, the S&P broke its short term uptrend several times earlier
this year only to rebound and reset to a new uptrend. So, I don’t see the pin
action itself as a reason to get worried. However, coupled with significantly deteriorating
breadth, my concern-o-meter is racheting up.
New lows spike.
https://sentimentrader.com/blog/a-split-market-as-oil-tumbles-into-a-bear-market/
The
hottest stocks are getting quietly killed.
TLT reestablished
its uptrend last week. Given the hawkish pronouncements from Powell, that might
seem a bit unusual. Check out the links under Inflation below and they
will spell out what the bond guys are thinking, i.e., Powell waited too late to
get hawkish and now the Fed will be tightening into a weaker economy---thereby
making it even weaker.
As
you can see, GLD followed through to the downside last week, in the process,
successfully resetting its 200 DMA to resistance. That is not exactly what you
would expect if inflation were in the forefront of investors’
minds---supporting the bond boys’ notion that we should be worried about a
weakening economy versus rising inflation.
The dollar continues
to trend higher. Again, that performance is more indicative of a
deflationary/noninflationary environment versus an inflationary one.
At least for last week,
it appears that most investors are now discounting slower economic growth
and/or less inflation. Let’s see if there is follow through among all the
indicators.
Friday in the
charts.
https://www.zerohedge.com/markets/bubble-market-bloodbath-powell-put-strike-plunges
Fundamental
Headlines
The
Economy
Review of Last Week
The US stats were positive
again last week, but the primary indicators were negative (two negative, one
positive). So, a mixed week and, hence, no third plus week in a row. As I said
last week, ‘two (weeks of upbeat numbers in a row) is
not enough for a trend to be set, but it is a beginning.’---which is now a
bit questionable.
Overseas, the data
were slightly positive. That does keep a two week (now three) streak alive.
Although with the European governments again overreacting this time to the
omicron variant, I can’t imagine that continuing.
My take on the
economy remains unchanged---it is struggling to grow, hampered by increasingly
irresponsible monetary and fiscal policies, getting no support from the global
economy and threatened by seemingly mounting inflationary forces---though
Markets were questioning the latter point this week.
Of course, the big
economic headline of the week was that transitory (inflation) is no longer. I
am not going to waste time with another diatribe about Fed incompetence. But
investors and consumers probably need to prepare themselves for some rougher
times.
US
International
October German factory orders fell 6.9% versus
estimates of -0.5%.
The November EU construction
PMI came in at 53.3 versus expectations of 51.5; the November German
construction PMI was 47.9 versus 48.5; the November UK construction PMI was
55.5 versus 54.2.
November UK YoY
car sales rose 1.7% versus consensus of down 12.0%.
Other
The
Fed
Can the Fed overcome its transitory policy
mistake?
Inflation
An inversion that likely means the end of the
inflation narrative.
Here
is a less professorial narrative on the above subject.
https://allstarcharts.com/treasury-spreads-tank/
Just
in case you have lingering doubts.
https://www.ft.com/content/056c2bb6-1ba7-46ad-ab43-e5b21e1c379d
The
coronavirus
World Health
Organization says no evidence that booster shot offers greater protection.
Bottom
line
Crazier than the
dot com bust.
News on Stocks in Our Portfolios
What
I am reading today
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