The Morning Call
5/9/22
The
Market
Technical
As
I noted in Friday’s Morning Call, I am suspending a directional call on the
S&P until there is follow through out of the current highly volatile
trading range. All of the headlines read bearish, the long Treasury is getting
trashed, but the buyers are holding in there. So, I am clueless. My sole
comment remains, if stocks break down, ~3800 is the next level where I see
support.
1970 all over
again?
https://jeffhirsch.tumblr.com/post/683444545860616192/1970-all-over-again
China weighs on
Market.
I noted last week
that TLT was still a long way from support, so more downside might be on the table.
Well, more downside it was. The long Treasury resumed its downward trek with a vengeance
and is now a short hair away from challenging the lower boundary of its
intermediate term trading range. Needless to say, a break of that boundary
would be quite negative. It would also likely hit Powell between the eyes with
a 2x4 and force a restatement of that ‘the committee isn’t considering a 75
basis point rise’ comment last Wednesday. Clearly, I will be paying close
attention to the 111.53 level this week.
Like everything
else, gold had a volatile week but basically closed flat with last Monday’s
close---suggesting GLD investors are just as divided as the stock boys over
last week’s events. So, I am just as uncertain. On the plus side, that gap down
open needs to be filled. On the negative side, GLD can drop a long way before
it challenges either of its DMAs or the lower boundary of its multiple uptrends.
The
dollar traded flat last week; but nothing in its pin action suggests a change. 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.
https://allstarcharts.com/is-there-a-stronger-trend-than-usd/
Who wins and who loses from a strong dollar?
https://www.nytimes.com/2022/05/06/business/dollar-stock-bond-currency.html
Friday in the
charts.
Fundamental
Headlines
The
Economy
Review of last Week
Last week the
economic data were slightly negative with two negative primary indicators and
one positive. Overseas stats were very downbeat.
Top CEO’s fear
recession in Europe.
The standout headline
of the week was, of course, the FOMC meeting and Powell’s follow on press
conference---of which the bottom line was a slightly more dovish narrative than
Market participants expected. That said, as I have tried to document, the Fed
is well behind the curve. The problem is that no one knows exactly how far,
including (and especially) the Fed---meaning the inflation will likely remain
higher for longer than expected and God only knows what the course of economic
growth will be. I have planted my flag in the ‘no recession’ one. Which is
looking somewhat questionable at this point.
The Fed is not
fixing the problem.
https://brownstone.org/articles/the-fed-is-not-fixing-the-problem/
How you know when
the Fed has lost control.
https://global-macro-monitor.com/2022/05/04/how-you-know-when-the-fed-has-lost-control/
For the moment though,
I am leaving my current forecast intact but with diminishing conviction: the economy is struggling to grow (but no
recession), hampered by irresponsible monetary and fiscal policies, getting no
support from the global economy and threatened by (1) inflationary forces and
(2) continued supply chain disruptions because of the conflict in Ukraine.
US
International
Other
JP Morgan global PMI slips to 22 month low.
https://www.markiteconomics.com/Public/Home/PressRelease/772fa2af717d4c629603f83ade20b9f6
Germany’s top banker warns of bankruptcy tsunami.
Inflation
Goldman lowers inflation forecast,
https://www.zerohedge.com/the-market-ear/ccdpxjhch0
Recession
Consumers are maxing out their credit cards.
Bottom line
Wall Street’s
biggest bear calls 3000 on the S&P.
News on Stocks in Our Portfolios
Illinois
Tool Works (NYSE:ITW) declares $1.22/share quarterly dividend, in line with previous.
What
I am reading today
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