Monday, January 31, 2022

Monday Morning Chartology

 

The Morning Call

 

1/31/22

 

 

 

The Market

         

    Technical

           

            Despite all the volatility, the S&P was basically flat on the week. However, it did successfully challenge its 200 DMA which is now resistance. On the other hand, the lower boundary of its recently reset short term trading range offered visible support. So, we now have a tight range defined by the 200 DMA on the upside and the lower boundary of the S&P’s short term trading range on the downside. Follow through is now key. The question is which way.

 

Here comes month end fund rebalancing.

https://www.zerohedge.com/markets/here-comes-fund-rebalancing-65-billion-month-end-buying



 

 

Like the S&P, the long bond bounced around a lot last week but ended roughly where it started. Short term, it is clearly under some pressure---having reset both DMAs to resistance. But I don’t see any panic over a tightening Fed (lower prices). I continue to believe the bond’s pin action is tied to the notion that ‘Powell waited too late to get hawkish and now the Fed will be tightening into a weaker economy---thereby making it even weaker.’

              https://www.zerohedge.com/the-market-ear/ck4mkl6o8k

 

             


 

            You would think that in the midst of all the volatility and uncertainty around Fed policy that gold would catch a bid. Au contraire, monsieur, it did just the opposite---trading from the top end of the pennant formation (straight red lines) to the bottom while challenging both DMA’s in just three trading days. All that pin action notwithstanding, the technical assumption remains that until it breaks out of that formation, it will be directionless.

 

 


 

The dollar had another good week; in fact, it has a great week, trading to near the upper boundary of its short term uptrend. I continue to believe that investors are buying the dollar on the thesis that whatever happens---inflation, recession, military conflict---the dollar will be the safe haven. There is one minor negative in this chart and that is the huge gap up open on Thursday which will need to be filled.

 


 


            Friday in the charts.

            https://www.zerohedge.com/markets/sp-slumps-worst-start-year-1939-yield-curve-yells-recession

 

           

 

    Fundamental

 

       Headlines

 

              The Economy

 

                        Review of last Week

 

The economic stats were downbeat last week, though the primary indicators were evenly divided (two plus, two minus, one neutral)---nothing to suggest a reversal in the current negative trend. Overseas, the numbers were negative, breaking a three week trend in positive data. The question is, which one is the outlier.

 

Of course, the major event of the week was the FOMC meeting, statement and Powell’s presser. I won’t repeat my conclusions. But I will say that the analysis that followed Powell’s hawkish comments is split in two camps: (1) he is not kidding and rate hikes and tapering are coming with a vengeance versus (2) it is the same on song, sound hawkish and fold like a cheap umbrella when the Market throws a hissy fit. If history is any guide, alternative (2) is clearly the most likely outcome.

 

In the meantime, my outlook remains unchanged---the economy is struggling to grow, hampered by irresponsible monetary and fiscal policies, getting no support from the global economy and threatened by (1) seemingly mounting inflationary forces and (2) a more severe than anticipated retreat in economic activity.

                       

 

                                                Atlanta Fed nowcast for Q1 GDP growth at 0.1%.

                        https://www.zerohedge.com/economics/atlanta-fed-shocker-us-economy-verge-contraction

 

 

                        US

 

                         

 

                        International

 

                         Q4 EU flash GDP growth was +0.3%, in line.

 

December preliminary Japanese industrial production declined 1.0% versus estimates of -0.8%; December preliminary retail sales were -1.0% versus +0.9%; December YoY housing starts were up 4.2% versus +6.2%; December YoY construction orders were up 4.8% versus +0.3%; January consumer confidence was 36.7 versus 39.5.

 

January preliminary German CPI was +0.4% versus consensus of -0.3%.

 

                        Other

 

                          Update on big four economic indicators.

                          https://www.advisorperspectives.com/dshort/updates/2022/01/28/the-big-four-real-personal-income-in-december?topic=market-indicators

 

                                Inflation

 

                    Labor costs growing at the fastest pace in two decades.

                    https://www.wsj.com/articles/us-employers-labor-costs-inflation-11643331612?mod=hp_lead_pos2

 

                     Here is what is pushing inflation higher.

                     https://www.zerohedge.com/markets/coming-cpi-print-critical-stocks-here-are-top-inflation-drivers

 

                   China

 

                     IMF says Chain’s economic imbalances have worsened.

                     https://www.wsj.com/articles/imf-says-chinas-economic-imbalances-have-worsened-11643356801

 

     Bottom line.

 

            BofA reiterates bearish stance.

            https://www.zerohedge.com/markets/bofa-fed-will-push-until-market-breaks-and-best-indicator-coming-crisis

 

            What to do when the Market is looking weak.

            https://www.pragcap.com/what-to-do-when-the-market-feels-crashy/

                         

    News on Stocks in Our Portfolios

                 

 

What I am reading today

 

            The most epic adventures in the fifty states.

            https://www.mensjournal.com/adventure/the-united-states-of-adventure-epic-trips-in-all-50-states/alaska/

 

            The fascinating history behind British names.

            https://www.bbc.com/culture/article/20160309-why-does-britain-have-such-bizarre-place-names

 

            Quote of the day.

            https://cafehayek.com/2022/01/quotation-of-the-day-3785.html?utm_source=feedburner&utm_medium=email

 

Visit Investing for Survival’s website (http://investingforsurvival.com/home) to learn more about our Investment Strategy, Prices Disciplines and Subscriber Service.

 

 

 

Friday, January 28, 2022

The Morning Call---More change than just rate hikes

 

The Morning Call

 

 

1/28/22

 

The Market

         

    Technical

 

            Thursday in the charts.

            https://www.zerohedge.com/markets/angry-stocks-come-terms-hawkish-fed-yield-curve-screams-policy-error

 

            Stress spreading beyond equities.

            https://www.zerohedge.com/the-market-ear/clahwjc2ve

 

            Inflation breakevens, TIPS and term spreads.

            https://econbrowser.com/archives/2022/01/breakeven-and-tips

 

            The dollar is king.

            https://www.zerohedge.com/the-market-ear/doubt

 

    Fundamental

 

       Headlines

 

              The Economy

 

                        US

 

                          December pending home sales dropped 3.5% versus estimates of -0.2%.

                          https://www.advisorperspectives.com/dshort/updates/2022/01/27/pending-home-sales-fell-in-december

 

December personal income was up 0.3% versus consensus of +0.5%; December personal spending was -0.6%, in line; the December PCE price index was +0.4%, in line; core PCE price index was +0.5%, in line.

 

The January Kansas City Fed manufacturing index was reported at 20 versus projections of 12.

                          https://www.advisorperspectives.com/dshort/updates/2022/01/27/kansas-city-fed-survey-activity-expanded-in-january

 

                        International

 

                          Q4 flash German GDP growth was -0.7% versus expectations of -0.3%.

 

                          January Japanese CPI was +0.5% versus forecasts of +0.9%.

 

The January EU economic sentiment index came in at 112.7 versus predictions of 114.5; the January industrial sentiment index was 13.9 versus 15.0; the January services sentiment index was 9.1 versus 10.3; January consumer confidence was -8.5, in line.

 

                        Other

 

                          Two shortages that threaten the economy.

                          https://www.zerohedge.com/markets/two-shortages-threaten-absolutely-eviscerate-global-economy-2022

 

            The Fed

 

              More change than just rate hikes.

              https://www.bloomberg.com/opinion/articles/2022-01-27/fed-s-projected-rate-hike-isn-t-the-only-change-behold-the-data-driven-era?sref=loFkkPMQ

 

              Goldman’s president blasts Fed.

              https://www.zerohedge.com/economics/goldmans-no-2-complains-overly-political-fed-does-not-have-will-stop-inflation

 

              Former Dallas Fed chief Fisher says Powell not coming to the rescue.

              https://www.zerohedge.com/markets/feds-fisher-market-must-take-beer-goggles-because-powells-not-coming-rescue

 

            Inflation

 

              Kraft Heinz raises prices on dozens of products.

              https://www.zerohedge.com/economics/kraft-heinz-again-raises-prices-dozens-products-inflation-continues-bite

 

            Geopolitics

 

              Why Putin has not been deterred.

              https://townhall.com/columnists/victordavishanson/2022/01/27/why-putin-has-not-been-deterred-n2602433

 

              Tensions in Ukraine are deescalating.

              https://www.zerohedge.com/markets/ruble-russian-markets-rebound-after-foreign-ministry-says-war-ukraine-unthinkable

 

              Demographics and insurgency.

              https://marginalrevolution.com/marginalrevolution/2022/01/who-will-fight.html

 

              Overcoming recency bias.

              https://marginalrevolution.com/marginalrevolution/2022/01/overcome-your-recency-bias.html

 

     Bottom line.

 

            P/E’s and forward earnings.

            https://www.linkedin.com/in/edward-yardeni/detail/recent-activity/

 

            Another doomsday prediction from Jeremy Grantham.

            https://www.bloomberg.com/news/articles/2022-01-26/grantham-has-an-even-scarier-prediction-than-his-crash-call?sref=loFkkPMQ

 

            Rewards are proportional to the risks taken---if you are lucky.

            https://www.fortunesandfrictions.com/post/heavy-above-the-line

 

            Blood in the streets.

            https://theirrelevantinvestor.com/2022/01/27/theres-blood-in-the-streets/

 

            JP Morgan: not enough capitulation.

            https://www.zerohedge.com/markets/jpmorgan-not-enough-capitulation-call-bottom

 

    News on Stocks in Our Portfolios

 

Apple (NASDAQ:AAPL) declares $0.22/share quarterly dividend, in line with previous.

 

What I am reading today

 

            The regulatory state is killing property ownership.

            https://www.adamsmith.org/blog/the-regulatory-state-is-killing-property-ownership

 

            The new space telescope reaches its destination.

            https://www.nytimes.com/2022/01/24/science/james-webb-telescope-arrival.html

 

Visit Investing for Survival’s website (http://investingforsurvival.com/home) to learn more about our Investment Strategy, Prices Disciplines and Subscriber Service.

 

 

 

Thursday, January 27, 2022

The Morning Call---Powell more hawkish than expected

 

The Morning Call

 

1/27/22

 

 

The Market

         

    Technical

 

            Wednesday in the charts.

            https://www.zerohedge.com/markets/stocks-bonds-puke-powell-hints-sooner-faster-qt

 

            The change in margin debt versus the S&P.

            https://www.zerohedge.com/the-market-ear/cayzoldi-y

 

    Fundamental

 

       Headlines

 

              The Economy

 

                        US

 

                          Weekly jobless claims totaled 260,000, in line.

 

The preliminary Q4 GDP growth rate was 6.9% versus estimates of 5.5%; the price index was up 7.0% versus +6.0%.

                          https://www.zerohedge.com/markets/us-gdp-soared-q4-69-despite-omicron-driven-huge-inventory-accumulation

 

                          December durable goods orders  fell 0.9% versus predictions of -0.5%.

                          https://www.zerohedge.com/markets/december-us-durable-goods-orders-tumbled-most-2020-covid-collapse

 

December new home sales rose 11.9% versus expectations of a 3.2% decline.

                          https://www.advisorperspectives.com/dshort/updates/2022/01/26/new-home-sales-up-11-9-in-december

                                 

 

                        International

 

December YoY UK auto production fell 12.7% versus projections of -16.3%.

 

December YoY Chinese industrial profits were up 34.3% versus consensus of +35.0%.

 

February German consumer confidence came in at -6.7 versus forecasts of -7.8.

 

                        Other

 

                          Who owns the US national debt?

                          https://politicalcalculations.blogspot.com/2022/01/january-2022-snapshot-of-who-owns-us.html#.YfF3W_7MKUk

 

            The Fed

 

The major headline of the day was the conclusion of the January FOMC meeting, its formal statement of policy and the follow up press conference of Chair Powell. My summary is as follows: (1) the FOMC policy statement was a bit more dovish than I had expected, mainly because of the vagueness of the Fed’s intentions with respect to shrinking its balance sheet [QT],  though it did suggest that several rate hikes in the 2022 were coming; however, (2) in Powell’s press conference, he was much more hawkish in his assessment of where the economy is [i.e., inflation higher, labor higher] and the Fed’s intentions to remedy that [i.e. the Fed balance sheet is far to large and needs to be substantially reduced, though admittedly vague about timing of such].

 

The FOMC red line statement along with some analysis.

https://www.zerohedge.com/economics/fed-warns-soon-be-appropriate-raise-rates-qe-ends-march

 

You know where I come to on this:  the Fed has never in its history made a successful transition from easy to neutral monetary policy. And it failed again this time. The Fed has put itself in a corner from which there are no good alternative to escape, which is say that it is now having to tighten just as the economy is starting to slow.

 

            Geopolitics

 

              The US responds to Russia’s security concerns.

              https://www.zerohedge.com/geopolitical/us-hand-delivers-written-response-russias-security-concerns-natos-door-open-ukraine

 

              The Pentagon backtracks.

              https://www.zerohedge.com/geopolitical/pentagon-backtracks-talk-russian-invasion-putin-responds-biden-personal-sanctions

 

              Russia/Ukraine uphold cease fire.

              https://www.zerohedge.com/geopolitical/russia-ukraine-agree-uphold-donbas-ceasefire-normandy-format-talks

 

            China

 

              China’s ‘plunge protection team’ comes to the rescue.

              https://www.zerohedge.com/markets/chinas-national-team-rushes-save-stocks-after-bear-market-signaled

 

     Bottom Line.

 

            Stability begets instability.

            https://ritholtz.com/2022/01/stability-begets-instability/

 

            Right sizing your risks.

            https://investorplace.com/smartmoney/2022/01/rightsizing-your-risk-and-overcoming-the-wealth-gap/?utm_source=rcm&utm_medium=editorial

 

            Are you investing or speculating?

            https://compoundadvisors.com/2022/are-you-investing-or-merely-speculating

 

            It is never a market crash problem.

            https://www.safalniveshak.com/never-a-market-crash-problem/

 

            The stock market fall and long term investors.

            https://johnhcochrane.blogspot.com/2022/01/stock-market-fall-and-long-term.html

 

            More advice for investing in a down market.

            https://www.nytimes.com/2022/01/25/business/stocks-hold-or-sell.html

 

            The Market decline is a test for what is real and what is not.

https://www.bloomberg.com/news/articles/2022-01-26/is-the-stock-market-crashing-2022-stress-test-has-companies-crypto-scrambling?srnd=premium&sref=loFkkPMQ

 

           

    News on Stocks in Our Portfolios

 

McDonald's press release (NYSE:MCD): Q4 Non-GAAP EPS of $2.23 misses by $0.11.

Revenue of $6B (+13.0% Y/Y) misses by $30M.

 

Sherwin Williams press release (NYSE:SHW): Q4 Non-GAAP EPS of $1.34 misses by $0.01.

Revenue of $4.76B (+6.0% Y/Y) in-line.

 

Altria press release (NYSE:MO): Q4 Non-GAAP EPS of $1.09 beats by $0.01.

Revenue of $5.09B (+0.8% Y/Y) beats by $90M.

 

Exxon Mobil (NYSE:XOM) declares $0.88/share quarterly dividend, in line with previous.

 

What I am reading today

 

           

                        JFK revisited.

            https://www.zerohedge.com/geopolitical/jfk-revisited-through-looking-glass-oliver-stone

 

 

Visit Investing for Survival’s website (http://investingforsurvival.com/home) to learn more about our Investment Strategy, Prices Disciplines and Subscriber Service.