The Morning Call
4/25/22
The
Market
Technical
Talk
about serious whackage. Thursday and Friday were waterfall days. The S&P tried
unsuccessfully to (1) stay above the upper boundary of that very short term
downtrend and (2) challenge its 100 and 200 DMAs but failed on both counts. It now
seems sure to challenge the area marked by both the lower boundary of its short
term trading range and the 23.6% Fibonacci retracement level. As you can see,
it has tested that area four times and bounced. Let’s see if it can do it
again.
The long Treasury tried
to stabilize last week. However, it remains to be seen if this is just a
temporary ceasefire or a true attempt to mark a bottom. As you know, I have
been nibbling at some long dated muni and corporate bonds, reflecting my
thoughts that the worst may be over or near being over. Of course, that won’t make
it so. And as I noted last week: ‘given the hefty distance between TLT’s
current price and the lower boundaries of both its newly reset intermediate
term trading range and its long term uptrend, prices could go a good deal lower
without totally breaking down.’
Bullish
information from bonds.
https://allstarcharts.com/bullish-info-from-bonds/
The technical and
fundamental case for buying the 10 year Treasury now.
https://www.zerohedge.com/markets/mish-technical-fundamental-case-buying-10-year-treasuries-now
Gold made a lower
low then proceeded to blow through the lower boundary of the uptrend off its
February low---suggesting that gold investors are more worried about higher
interest rates than higher inflation. That said, it will have to drop a long
way before it challenges either of its DMAs or the lower boundaries of its
multiple uptrends. Until something breaks, the assumption is that the long term
trend remains to the upside.
Nothing
has changed. The dollar’s chart continues to be the healthiest of the lot. 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.
https://www.zerohedge.com/markets/bondstock-bloodbath-leads-worst-start-year-record
Fundamental
Headlines
The
Economy
Review of last Week
Last week the
economic data were sparse and slightly negative although the primary indicators
were balanced (one positive, one neutral, one negative). Overseas stats were solidly
to the plus side.
So, the numbers continued
to validate my outlook: the economy is
struggling to grow (but no recession), hampered by irresponsible monetary and
fiscal policies, getting no support from the global economy (last week
notwithstanding) and threatened by (1) inflationary forces and (2) continued
supply chain disruptions because of the conflict in Ukraine.
The Fed remains in
the spotlight as investors contemplate just how serious the Fed is about
tightening. Certainly, it (its officials) is talking a good game. But if it was
as determined to slash inflation as it was about bailing out the economy (QEForever
at the slightest economic hiccup), it wouldn’t just be sitting around jawing about
how tough it is going to be. To date, this (lack of) action falls woefully
short of what is necessary to return the economy to a stable, equitable growth rate
and the Market to the arbiter of the price of risk---which means inflation will
likely be higher for longer, but the economy will avoid recession.
Will a strong
labor market prevent a recession?
https://www.capitalspectator.com/will-the-strong-labor-market-prevent-a-us-recession/
US
The March Chicago national activity index was
reported at .44 versus forecasts of .40.
International
February EU YoY construction output rose 9.4% versus estimates of +5.0%.
The April German
business climate index came in at 91.8 versus predictions of 89.1
The April UK
business optimism index was -34 versus consensus of -23.
Other
The
Fed
The biggest story on one is talking about (must
read).
Inflation
Indonesia bans export of edible oils.
Geopolitics
Thoughts on the Ukraine/Russian conflict from
Nassim Taleb.
https://medium.com/incerto/a-clash-of-two-systems-47009e9715e2
Two words: Minsk II.
https://www.zerohedge.com/geopolitical/minsk-ii-two-words-youll-never-hear-mainstream-news
Bottom line
When cash is king.
https://compoundadvisors.com/2022/when-cash-is-king
High yield bonds
in times of stress.
Steve Cohen on
keeping things simple.
https://www.zerohedge.com/markets/steve-cohen-making-trading-harder-it-has-be
News on Stocks in Our Portfolios
What
I am reading today
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