The Morning Call
1/24/22
The
Market
Technical
Not
a pretty picture. Last week, the S&P reset its short term trend to a trading
range, reset its 100 DMA to resistance and began a challenge of its 200 DMA
(now support; if it remains there through the close on Wednesday, it will
revert to resistance). Clearly, the assumption that the bias is to the upside
is under attack. As you know, I have believed (for too long) that stocks in
general were too generously valued and that a reversion to the mean was the
likely outcome. That may be occurring now. Or it may just be another one of
those hair raising ‘buy the dip’ moments. Whatever, the good news is that (1) I
have plenty of cash from selling a portion of my positions in stocks that
traded into their Sell Half zone and (2) some stocks are already entering the
Buy Value zone---which I alerted you to late last week. The best course in
trying moments like the present is to stick with your strategy and not panic. All
that said, the Market is oversold, so some sort of bounce is likely.
https://www.zerohedge.com/markets/when-wild-bull-stumbles-hibernating-bear
The current risk
profile of the S&P.
https://www.capitalspectator.com/sp-500-risk-profile-21-january-2022/
But doom and gloom
from BofA.
https://www.zerohedge.com/markets/bank-america-if-nasdaq-closes-below-14000-all-hell-breaks-loose
Liquidity---never
there when you need it.
https://www.zerohedge.com/the-market-ear/c9rfl7go0
The Buffett
indicator.
https://www.zerohedge.com/the-market-ear/cn3i24ayuz
This is not the chart
that I would expect to see at a time when stocks are plunging over fear of a
tightening monetary policy. To be sure, TLT is off its recent high and has
traded down through both MA’s. But I don’t see the same panic in this pin
action as in equities. So, while bond investors may be concerned about a more hawkish
Fed, they may also be factoring some geopolitical risk (Ukraine) and/or worried
about my own 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.’
Ed Yardini on the Fed and the bond
market.
https://www.linkedin.com/in/edward-yardeni/detail/recent-activity/
GLD
had another up week but like the long bond didn’t show much sign on anxiety. 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 and, hence, nothing fundamental.
https://www.zerohedge.com/the-market-ear/oldsafe
The dollar had good
week. Technically, it bounced off both the lower boundary of its short term uptrend
and its 100 DMA---leaving both in positive trends. 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.
https://www.zerohedge.com/the-market-ear/cj4f679cyx
Friday in the
charts.
https://www.zerohedge.com/markets/market-screams-panic-powell-tech-wrecks-worst-over-30-years
What the Markets
are currently discounting.
https://www.zerohedge.com/markets/how-much-market-stress-enough
Fundamental
Headlines
The
Economy
Review of last Week
The economic stats
were evenly divided last week as were the primary indicators---nothing to
suggest a reversal in the current negative trend. Overseas, the numbers were
slightly upbeat, sustaining a now three week trend in positive data. Another
week or so of similar stats and I will have to consider a change in trend---which
would clearly be a plus for the US.
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.
US
The December leading economic indicators were
reported at +0.8, in line.
The December
Chicago Fed national activity index came in at -.15 versus projections of +.49.
International
The January Japanese
flash manufacturing PMI was 54.6 versus estimates of 54.0; the flash services PMI
was 46.6 versus 52.0; the flash composite PMI was 48.8 versus 52.1.
The January German
flash manufacturing PMI was 60.0 versus predictions of 57.0; the flash services
PMI was 42.2 versus 48.0; the flash composite PMI was 54.3 versus 49.2.
The January EU flash
manufacturing PMI was 59.0 versus forecasts of 57.5; the flash services PMI was
51.2 versus 52.2; the flash composite
PMI was 52.4 versus 52.6.
The January UK
flash manufacturing PMI was 56.9 versus consensus of 57.9; the flash services
PMI was 53.3 versus 54.8; the flash composite PMI was 53.4 versus 55.0.
Other
Current Q4 GDP forecasts.
https://www.calculatedriskblog.com/2022/01/q4-gdp-forecasts-5-to-6.html
The
Fed
The Fed and bitcoin (must read).
https://www.zerohedge.com/markets/revolution
Geopolitics
While I am not a
huge fan of the French, Macron’s suggestion that the EU should be included in
the US/Russia negotiations over Ukraine does not seem out of line. After all,
if a hot war breaks out, the EU is a lot closer to the action than the US. In
addition, the EU needs to be taking more responsibility for its own
defense---both financial as well as boots on the ground.
Bottom line.
Jack Bogles’ rules
for investing.
https://ritholtz.com/2022/01/jack-bogles-rules-for-investing/
News on Stocks in Our Portfolios
What
I am reading today
Death
by paperwork.
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