The Morning Call
5/31/22
The
Market
Technical
A
great week following a terrible week. I noted last week that a lot of technical
damage had been and that it would take time to repair it. I could not have been
more wrong. That said, bear markets are characterized by face ripping rallies
and we got that in spades. So, I am not suggesting that the worst is over. There
is still a lot of resistance overhead: (1) both DMA’s and (2) the upper
boundary of its short term downtrend. Plus, the mid May lows just didn’t have
the feel of a Market bottom. I put money to work at lower levels, so I am not
going to chase this rally.
The long bond extended
its rally for the third week; in the process taking out that short term downtrend off its early March high.
However, it still has a lot of visible resistance levels to overcome before it
makes sense to think the worst is over: (1) both DMA’s (2) the very short term
downtrend and (3) the short term downtrend. So, the best I can say is that TLT
has made a good start at reversing its downtrend. But much more to go.
If you are a gold
bull, you had another good week---this time resetting its 200 DMA to support. It
continues to look like the worst is over.
The
dollar had another disappointing week; but it has been so strong for so long,
that no technical damage has been done nor will it be done anytime soon. 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/soaring-stocks-break-100-year-losing-streak-amid-macro-meltdown
Sell the rally?
Fundamental
Headlines
The
Economy
Review of last Week
Last week’s economic
dataflow was overwhelmingly negative as were the primary indicators (five
negative to one positive). Overseas stats were again balanced.
This really
terrible week in the US keeps me in neutral (even odds on a recession). Clearly
if the trend remains negative, I will need
to further downgrade my forecast.
‘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.
US
International
The April Japanese
unemployment rate was 2.5% versus predictions of 2.6%; April retail sales were
up 0.8% versus +0.5%; preliminary April industrial production was -1.3% versus
-0.2%; April YOY housing starts were up 2.2% versus +3.0%; April YoY
construction orders were up 30.5% versus -2.0%; May consumer confidence was
34.1 versus 33.5.
The April German
unemployment rate was 3.0% versus consensus of 2.9%; preliminary May German CPI
was 0.9% versus consensus of 0.5%.
The May Chinese manufacturing
PMI was 49.6 versus expectations of 48.9; the May nonmanufacturing PMI was 47.8
versus 44.0.
May EU economic
sentiment came in at 105 versus estimates of 104.9; May industrial sentiment
was 6.3 versus 7.5; May services sentiment was 14.0 versus 14.3; May consumer
confidence was -21.1, in line; May flash CPI was +0.8% versus +0.1%.
Other
April real disposable income per capita.
The
Fed
Cleaning up the Fed’s mess.
Will the Fed pause in September?
https://www.zerohedge.com/markets/fed-will-pause-rate-hikes-september-heres-how-trade-it
Inflation
Is high inflation already behind us.
https://www.zerohedge.com/markets/high-inflation-may-already-be-behind-us
Fiscal
Policy
The bungled math behind the failure to
approve offshore leases.
Geopolitical
The New York Times shift on victory in
Ukraine.
https://www.zerohedge.com/political/new-york-times-dramatic-shift-victory-ukraine
Buyer Alert
In the latest
review of Healthcare Services Group Inc (HCSG), in failed to meet the minimum
financial criteria for inclusion in the High Yield Portfolio. According, I will
Sell my position at the market open.
Bottom line
Lessons from Paul
Tudor Jones.
https://www.zerohedge.com/markets/lessons-trading-great-paul-tudor-jones
News on Stocks in Our Portfolios
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