The Morning Call
2/22/22
The
Market
Technical
We
saw a continuation of the volatile news flow on the Fed and Ukraine last week---which
spilled over into stock prices. The S&P negated the challenge of its 200
DMA, marked a new higher low, then proceeded to rechallenge its 200 DMA (now
support; if it remains the through the close on Thursday, it will revert to
resistance) and voided what looked like a developing very short term uptrend. While
this appears to be a negative, given the volatile headlines, my conclusion is
the same as last week---keep your directional expectations on hold.
https://www.zerohedge.com/the-market-ear/cvdloex-c
Technically, the
bond market current state did not change last week. It remains in a well-defined
two month downtrend. It also traded down to the lower boundary of its short term
trading range and bounced. So, we continue to have the same near-in directional
markers---the upper boundary of the very short term downtrend and the lower boundary
of the short term trading range. As with equities, keep your directional expectations
on hold.
I thought a long
term chart would provide a bit more perspective on gold than the regular one
year chart. GLD has firmly broken out of that eight month pennant formation. However,
it faces even stronger resistance in the 185-195 area where it marked all-time
highs. If it successfully challenges that area, there is nothing to stop it from
going significantly higher---‘if’ being the operative word. In the meantime, it
made a huge gap up open on last Thursday, which needs to be filled.
The dollar remains
in a nine month uptrend and continues to negotiate its way through the volatile
headlines. My assumption remains that irrespective of what happens, investors
continue to believe that the dollar is a safe place to be.
Friday in the
charts.
Update
on money flows into equities.
https://www.zerohedge.com/markets/one-bank-spots-market-signal-recession-shock-coming
Where is the Fed
put?
https://www.zerohedge.com/markets/fed-put-what-and-where-it
Fundamental
Headlines
The
Economy
Review of last Week
The economic stats
were again disappointing in total last week with PPI running hotter than
anticipated. However, the primary indicators were three to one to the positive.
Overseas, the numbers were mixed.
As I noted above
PPI was higher than expected which follows the previous week’s hotter than expected
CPI number---'which only the aggravates the worries about
an ever tighter monetary policy. Not that higher rates and Quantitative
Tightening aren’t needed to correct the gross distortions in the pricing of
risk and the income inequities caused by perpetually low rates and QE. But, as I
have constantly reminded you, it should have been done years ago; and now a
retreat from the extremes of overly expansive monetary policy will unfortunately
impose maximum pain on the economy and the Markets. Of course, the Fed could
always chicken out and retreat; but then it will have inadequately dealt with
inflation who’s its impact on the economy and Markets will worsen. As I have
said, the Fed has painted itself into a corner from which there is no easy
escape.’
The strong primary
indicators performance does not comport with my current economic outlook; but
this is one week’s data and certainly doesn’t establish any kind of trend. So,
my forecast remains that 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 Case
Shiller home price index was up 1.1% versus forecasts of +0.8%.
International
The January German
PPI was 2.2% versus projections of 1.5%.
The February
German business climate index was reported at 98.9 versus expectations of 96.5.
The February UK
industrial trades index was 20 versus consensus of 25.
The February
Japanese flash manufacturing PMI came in at 52.9 versus estimates of 55.0; the flash
services PMI was 42.7 versus 48.6; the flash composite PMI was 44.5 versus
49.7; the February German flash manufacturing PMI was 58.5 versus 59.7; the
flash services PMI was 56.6 versus 53.0;
the flash composite PMI was 56.2 versus 54.3; the February flash UK manufacturing
PMI was 57.3 versus 57.2; the flash services PMI was 60.8 versus 55.5; the
flash composite PMI was 60.2 versus 55.0; the February EU flash manufacturing
PMI was 58.4 versus 58.7; the flash services PMI was 55.8 versus 52.0; the
flash composite PMI was 55.8 versus 52.7.
Other
The Fed
Jim Bianco on Fed policy.
The ECB is trapped like the Fed.
https://www.zerohedge.com/economics/european-central-bank-trapped-fed
Inflation
John Mauldin’s thoughts on inflation.
https://www.advisorperspectives.com/commentaries/2022/02/18/inflation-thoughts
Geopolitics
In case you haven’t turned the TV on.
More on the 1990 US/NATO/Russian
agreement.
Forget Ukraine, its inflation, stupid.
https://www.zerohedge.com/markets/geopolitical-crises-what-happens-next-markets
News on Stocks in Our Portfolios
Medtronic press release (NYSE:MDT): Q3 Non-GAAP EPS of $1.37
in-line.
Revenue of $7.8B (flat Y/Y) misses by $110M.
Home Depot press release (NYSE:HD): Q4 Non-GAAP EPS of
$3.21 beats
by $0.03.
Revenue of $35.72B (+10.7% Y/Y) beats by $870M.
Home Depot (NYSE:HD) declares $1.90/share quarterly dividend, 15.2% increase from
prior dividend of $1.65.
What
I am reading today
The
Saudi incursion into pro golf could torpedo the PGA.
https://slate.com/culture/2022/02/golf-saudi-tour-liv-pga-tour-challenge-mickelson-dechambeau.html
How to overcome regrets.
https://www.bakadesuyo.com/2022/02/no-regrets/
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