Investing for Survival: Monday Morning Chartology

The Morning Call

6/6/22

The Market

Technical

While the S&P ended down for the week, it remains in a very short term trading range. What I am watching: (1) if it moves higher, can it mark a second higher high---which would suggest the rally still has legs, (2) if it moves lower, will it [a] decline modestly and mark a higher low---which would also be a plus or [b] will it take out the May 20 low---which would not be good. This is a great time to watch and do nothing.

The first thing that needs to happen is for stocks to stop going down.

https://allstarcharts.com/the-adorable-return-free-risk/

The long bond tried to challenge that downtrend off its March 1 high but failed. So, another challenge of the lower boundary of its intermediate term trading range appears likely. Higher rates (tighter Fed) seem to be the worry.

In a fitful trading week, GLD (1) held on to its bounce off the lower boundary of its very short term uptrend, just barely marking a second higher high, (2) made its first higher low and (3) remained above its 200 DMA [now support]. It continues to look like the worst is over, though just barely.

The dollar regained some traction last week, leaving it in a solid technical position. It needs to lift from here; but as I said last week, even if it doesn’t it has been so strong for so long, that no technical damage has been done nor will it be done anytime soon. Everybody on the globe wants it to go down, which is probably why it won’t as long as the investors believe that the Fed will hang tough on raising rates and QT. (as a reminder, I think that it will fold like a cheap umbrella).

Friday in the charts.

https://www.zerohedge.com/markets/oil-pops-stocks-drop-hawks-hurricanes-killed-dead-cat-bounce

Technically speaking.

https://realinvestmentadvice.com/technical-review-of-the-market-where-to-next/?utm_medium=email&utm_campaign=Real%20Investment%20Report%20Technical%20Review%20Of%20The%20Market%20Where%20To%20Next&utm_content=Real%20Investment%20Report%20Technical%20Review%20Of%20The%20Market%20Where%20To%20Next+CID_9c1aa809dbf68a1535a59746744c74be&utm_source=RIA%20Email%20Marketing%20Software&utm_term=READ%20MORE

Goldman: strength is to be sold.

https://www.zerohedge.com/markets/goldmans-bearish-view-strength-be-sold-while-longer

Fundamental

Headlines

The Economy

Review of last Week

Last week’s economic dataflow was negative as were the primary indicators (two negative, one neutral, one positive). Overseas stats were slightly downbeat.

Another bad week, so my neutral stance (even odds on a recession) keeps fading; though there are enough positives to keep me in place. That said, 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.

International

Other

The Fed

Monetary policy is all talk and always has been.

https://www.realclearmarkets.com/articles/2022/06/03/monetary_policy_is_all_talk_all_the_time_and_always_has_been_835544.html

The problem with a $31 trillion balance sheet.

https://www.zerohedge.com/markets/when-whales-central-banks-need-exit-there-point-where-every-ordinary-investor-forced

Fiscal Policy

Social Security and Medicare trust funds nearing insolvency.

https://www.zerohedge.com/personal-finance/us-social-security-and-medicare-approach-insolvency-warns-trustees

Yellen throws Biden under the bus.