The Morning Call
5/23/22
The
Market
Technical
You
don’t need me to tell you that it was a rough week for stocks. I suppose that
the good news is that (1) there are multiple technical oversold signals and (2)
the S&P hit the 38.2% Fibonacci retracement level and bounced for a second
time. The bad news is that these are the only good news. Even if the worst is
over, enormous technical damage has been done that will likely take time to
repair. I think that there is an even chance that the S&P will test lower
levels: (1) the lower boundary of its intermediate term uptrend [~3674]; (2)
the 50% Fibonacci retracement level [~3507].
Patience.
A
contrarian buy signal?
https://www.zerohedge.com/the-market-ear/contrarian
Or
could it get a lot worse?
https://www.zerohedge.com/the-market-ear/cgdwhdks0c
Liquidity getting
worse.
https://www.zerohedge.com/the-market-ear/cjiknyo3qp
The long bond made
it a two week rally; in the process marking a higher low. The upside is that
this could have been the retest of the lower boundary of its intermediate term
trading range, possibly signaling that the bond bear market is over. On the
other hand, TLT has not even taken out the very shortest of downtrends. Until that
happens, assuming that the worst is over is a stretch.
https://www.reuters.com/markets/us/global-markets-flows-graphic-2022-05-20/
Bonds at a critical
inflection point.
https://allstarcharts.com/bonds-reach-a-critical-inflection-point/
If you are a gold
bull, you gotta love last week’s pin action. It traded (1) through the lower boundary
its short term uptrend, successfully reset set it to a trading range then
immediately re-established the uptrend, (2) down to the lower boundary of its
very short term uptrend, touched it, then bounced closing above both and (3 in
the process, reset its 200 DMA to resistance, then immediately rechallenged it
to the upside [if it remains there through the close on Tuesday, it will revert
back to support. The only negative is
that small gap up open on Thursday. That said, I think that there is a decent chance that the
worst is over for GLD.
The
dollar had its first down week in over a month; but nothing technically significant
was broken. So, I see no reason to assume that that the dollar’s strength won’t
continue.
Friday in the
charts.
https://www.zerohedge.com/markets/dow-suffers-longest-losing-streak-99-years-bonds-bullion-bid
The recession
trade is on.
https://www.wsj.com/articles/recession-trade-is-on-as-market-pain-spreads-beyond-tech-11653014751
Fundamental
Headlines
The
Economy
Review of last Week
Last week’s economic
dataflow was negative though positive primary indicators outnumbered negative
ones by two to one. Overseas stats were balanced.
Despite the upbeat
primary indicators, I would judge last week to be another negative in what is
becoming an extended string of negative. That is enough for me to go neutral;
that is, I now calculate even odds that we will get a recession.
‘That
said, the key variable in this equation is Fed policy, more specifically, how hard
is it prepared to fight inflation? History tells us that the most likely way of
curbing inflation is through recession. History also tells us that this group
running the Fed now lack cojones.
So,
the question here is that once the Market believes a recession is coming and
starts fully pricing it in (which it is already starting to do), (1) will the
Fed chicken out like it has every prior time since the Volcker regime and begin
reinflating the economy or (2) has the recession already started?’
Do I believe history?
Or do I believe Powell? I side with history; meaning the Fed chickens out and
if we get a recession, it will be a mild one.
Jeffrey Snider
thinks that it will be worse.
So does PIMCO.
https://www.ft.com/content/818edca4-d2d3-42be-9280-3a0692d9a51b
Recession warnings
mount.
This author thinks
that it is still too early to call.
https://www.capitalspectator.com/us-recession-risk-may-be-rising-but-growth-still-prevails/
US
The April Chicago
national activity index came in at .47 versus forecasts of .35.
International
The May German
business climate index was reported at 93.0 versus estimates of 91.4; the May current
conditions index was 99.5 versus 97.5.
Other
China makes unexpected rate cut.
Mortgage delinquencies hit another low.
https://www.calculatedriskblog.com/2022/05/black-knight-mortgage-delinquencies-hit.html
The changes in the global economy and who
benefits.
Subprime loan delinquencies increasing.
Inflation
Prices are about to fall off a cliff (absolute
must read).
https://www.zerohedge.com/markets/bullwhip-effect-ends-bang-why-prices-are-about-fall-cliff
Bottom line
The biggest risk
to the Market (must read)
News on Stocks in Our Portfolios
What
I am reading today
Quote of the day.
https://cafehayek.com/2022/05/quotation-of-the-day-3899.html?utm_source=feedburner&utm_medium=email
Everything you want to know
about monkeypox.
https://www.zerohedge.com/medical/everything-you-want-know-about-monkeypox-were-afraid-ask
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