Monday Morning Chartology

 

The Morning Call

 

1/10/22

 

 

 

The Market

         

    Technical

 

           

            As you can see, the S&P didn’t have a particularly good week, especially since it has just reset its short term trend to up. I mentioned the possibility of a false breakout in last week’s Monday Morning Chartology. Given the lack of follow through, that scenario remains on the table. Nonetheless, the S&P is within uptrends across all timeframes and above both DMA’s. So, my assumption has to be that the direction is up; although the S&P is approaching the lower boundary of its newly reset uptrend and it will be important for that level to hold.

 

The long bond got monkey hammered last week on the wings of the unexpectedly hawkish FOMC minutes. It reset both DMAs to resistance and cut through the uptrends off the March and October lows like a hot knife through butter. There are two possible explanations for this kind of pin action: (1) the economy will stay stronger for longer requiring a tighter,  more enduring monetary policy than originally assumed or (2) as Scott Grannis hypothesizes below the demand for money will decline dramatically, pushing consumers to demand more goods than supply can satisfy, thus driving up prices. If the former alternative manifests itself, then my thesis that ‘Powell waited too late to get hawkish and now the Fed will be tightening into a weaker economy---thereby making it even weaker.’ will be wrong. Having said all that, one week does not a trend make. So, stay tuned for follow through.

 

              The case for higher inflation.

              http://scottgrannis.blogspot.com/2022/01/the-fed-is-ignoring-demand-for-money.html

 

 

   

         GLD also had a disappointing week, though not to the extent of equites and bonds. While down, it attempted a challenge of its 100 DMA and failed. On the other hand, it is mid-challenge of its 200 DMA; I await the outcome. Meanwhile, it remained within the narrowing pennant formation [two straight red lines]---the technical assumption being that until it breaks out of that formation, it will be directionless.

 

The dollar continued its drift lower but remains solidly in its short term uptrend and above both DMA’s, suggesting that whatever the economic scenario, investors are reasonably confident that the US economy will perform well versus the rest of the world.

 

 

            Friday in the charts.

            https://www.zerohedge.com/markets/nasdaq-100-suffers-worst-start-year-2000-rates-risk-parity-routed

 

    Fundamental

 

       Headlines

 

              The Economy

 

                        Review of last Week

 

US data was negative last week, though the primary indicators were evenly matched. Overseas the stats were positive for a change but that does not change their negative drift. So, there is still little evidence of any explosive growth in either the US or global economies.

 

Of course, the big news last week was the more hawkish than expected tone to the December FOMC minutes---which fit nicely with my overall outlook. That 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---the result of the Fed that likely waited too long to start tightening.

                        https://www.realclearmarkets.com/articles/2022/01/07/the_economys_strength_pre-coronavirus_was_well_overstated_810972.html

                           

                                               

                                                The case for why the Fed will blink.

https://thereformedbroker.com/2022/01/07/heres-what-happened-the-last-time-the-fed-attempted-to-shrink-its-balance-and-hike-rates-simultaneously/

 

 

                        US

           

                        International

                              

                         The November EU unemployment rate was 7.2%, in line.  

 

                        Other

                       

 

Inflation

 

                  Edible oil prices hit record high.

              https://www.zerohedge.com/commodities/edible-oil-prices-hit-record-high-food-inflation-worries-persist

 

              Rents are increasing sharply.

              https://www.calculatedriskblog.com/2022/01/rents-still-increasing-sharply-year.html

 

            The coronavirus

 

              Omicron variant less deadly than seasonal flu.

              https://www.zerohedge.com/covid-19/omicron-could-end-being-less-deadly-seasonal-flu-new-us-study-finds

 

    Bottom line.

 

            Great must read interview with Louis-Vincent Gave.

            https://themarket.ch/interview/louis-gave-a-hawkish-fed-could-provoke-an-equity-crash-ld.5727

 

    News on Stocks in Our Portfolios

                 

 

What I am reading today

 

            Quote of the day.

            https://cafehayek.com/2022/01/bonus-quotation-of-the-day-718.html?utm_source=feedburner&utm_medium=email

 

            Eight degrees of stupidity.

            https://www.zerohedge.com/political/eight-degrees-ignorance-and-stupidity

 

            One hundred ways to slightly improve your life.

            https://www.theguardian.com/lifeandstyle/2022/jan/01/marginal-gains-100-ways-to-improve-your-life-without-really-trying

 

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