The Morning Call
2/7/22
The
Market
Technical
The
S&P rallied early last week, challenging its 100 DMA and the upper boundary
of a very short term downtrend---and failed. That left the 100 DMA as
resistance and also marked a lower high. If volatility remains as high as it
has been, then this week be interesting since the index faces several near in resistance
(100 DMA and that very short term downtrend) as well as support (200 DMA and
the lower boundary of its short term treading range) levels. As with last week,
the key at the current juncture is follow through---the question being, in
which direction.
Sentiment and
seasonality.
https://allstarcharts.com/sentiment-seasonality/
Money flows are
turning positive.
https://www.zerohedge.com/markets/goldman-first-time-2022-we-see-massive-net-inflows-stocks-week
 |
The long bond resumed
its downward journey, helped along by growing signs of inflation as well as
hawkish announcements on monetary policy from the Bank of England and the ECB---neither
of which are likely to turn around in the near future. The technical picture
supports that view with TLT having made a new lower high and the lack of any visible
support between current prices and the lower boundary of its short term trading
range.
Jeffrey
Snider deals with the conundrum of high levels of risk and low interest rates.
GLD
remains stuck in that pennant formation (straight red lines) where it has been
for almost nine months. My technical assumption remains that until it breaks
out of that formation, it will be directionless.
Talk about taking
a shellacking, last week the dollar’s heightened volatility made up for the
prior extended period of relative calm. It is now in the midst of a challenge of
the lower boundary of its short term uptrend and appears ready to challenge its
100 DMA. My assumption is that this sudden change in its pin action is a result
of concerns over our inept handling of the crisis in Ukraine as well as the
aforementioned move to a more hawkish stance by the Bank of England and the ECB
(if everybody is raising rates then the dollar is relatively less attractive).
Friday in the
charts.
https://www.zerohedge.com/markets/cryptos-jump-stocks-slump-bonds-dollar-dump
Fundamental
Headlines
The
Economy
Review of last Week
The economic stats
were upbeat in total last week, though the primary indicators were negative (one
plus, two minus). Of course, one week doesn’t a trend make. Let’s see if there
is any follow through. Overseas, the numbers were again negative.
The one datapoint
that bears mentioning was the nonfarm payrolls number which was quite positive.
When I saw the number, I thought that this good news may provide additional cover
for the Fed’s new tighter monetary policy---which may be bad news for the
Markets. That I idea was quickly shot down by:
(1) analysts doing a dive
into the data and realizing the stat was misleading,
https://www.zerohedge.com/markets/here-whats-behind-todays-stunning-payrolls-beat
(2) a Fed ‘leak’
that no acceleration in tightening would be forthcoming.
https://www.zerohedge.com/markets/feds-reuters-mouthpiece-no-50bps-rate-hike-march
Which leaves me
with my economic outlook intact ---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
International
The preliminary December
Japanese leading economic indicators came in at 104.3 versus estimates of 103.0.
December German
industrial production fell 0.3% versus expectations of +0.4%.
The January
Chinese Caixin services PMI was 51.4 versus consensus of 51.0; the composite PMI was 50.1 versus 50.5.
Other
Inflation
World food prices accelerate in January.
https://www.zerohedge.com/commodities/world-food-prices-accelerate-january-set-record-high
Bottom
line.
The latest from
BofA.
Is
the test over?
https://www.zerohedge.com/markets/morgan-stanley-it-begins
An in-depth look
at Q4 earnings.
https://www.zerohedge.com/the-market-ear/evenworse
News on Stocks in Our Portfolios
What
I am reading today
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