Tuesday, June 14, 2022

The Morning Call--Beware mean reversion

 

The Morning Call

 

6/14/22

 

 

The Market

         

    Technical

 

            Monday in the charts.

            https://www.zerohedge.com/markets/carnage

 

Note: the S&P closed below its 5/20 low (now officially in a bear market), the 38.2% Fibonacci retracement level and a short hair away from the lower boundary of its intermediate term uptrend (~3705). I said yesterday that these were the levels to watch; and so far, the results have not been encouraging. Further, the long bond ended below the lower boundary of its intermediate term trading range. If that challenge is successful, I think that really spells trouble in stock land. Still, at least for now, the S&P intermediate term uptrend remains intact. Plus, it had its second gap down open in a row---suggesting that the momentum to the downside is getting stretched.

           

            Bond market now pricing in strong likelihood of a 75 basis point rate hike.

            https://www.bloomberg.com/news/articles/2022-06-13/a-fed-rate-hike-of-75-basis-points-is-a-done-deal-for-traders?srnd=premium#xj4y7vzkg&sref=loFkkPMQ

 

            Which is being given substance by latest article by WSJ Fed ‘whisperer.’

            https://www.zerohedge.com/markets/panic-yields-soar-after-wsj-fed-leaker-says-odds-rising-75bps-rate-hike

 

            The higher dollar is costing US companies billions in earnings.

            https://www.ft.com/content/189a161c-7247-431d-83fa-f7645ee22573

 

    Fundamental

 

       Headlines

 

              The Economy

 

                        US

 

May consumer inflation expectations were for +6.6% versus projections of +6.2%.

 

The May small business optimism index came in at 93.1 versus forecasts of 93.0.

 

                        International

 

                          April Japanese industrial production fell 1.5% versus estimates of -1.3%.

 

The April UK unemployment rate was 3.8% versus predictions of 3.6%; April average earnings were up 6.8% versus +7.6%.

 

                          May German CPI rose 0.9%, in line; May PPI was up 1.0% versus +1.3%.

 

June EU economic sentiment was -28.0 versus expectations of -25.9; June German economic sentiment was -28.0 versus -27.5.

 

                        Other

 

                          Update on five high frequency economic indicators.

                          https://www.calculatedriskblog.com/2022/06/five-high-frequency-indicators-for.html

 

                          Last week in the economic charts.

                          https://compoundadvisors.com/2022/9-chart-monday-6-13-22

 

            The Fed

 

              The Fed tightening need not result to recession (must read).

              http://scottgrannis.blogspot.com/2022/06/fed-tightening-need-not-result-in.html

 

              Japan on the verge of a systematic collapse.

              https://www.zerohedge.com/markets/japan-verge-systemic-collapse-dramatic-unpredictable-non-linearities-financial-markets-bank

 

            Fiscal Policy

 

              A trillion here, a trillion there……….

              https://www.advisorperspectives.com/commentaries/2022/06/10/a-trillion-here-a-trillion-there

 

              Uncle Sam isn’t Santa Claus.

              https://www.linkedin.com/feed/hashtag/?keywords=consumers

 

            Inflation

           

              More on peak inflation.

              https://reason.com/2022/06/10/has-inflation-peaked/

 

              Oil spikes on reports that Libya is shutting down most of its oil fields.

              https://www.zerohedge.com/energy/libya-loses-11-million-bpd-it-shuts-down-nearly-all-its-oil-fields

 

     Bottom line.

 

            One analyst’s answer on how to handle this market.

            https://thereformedbroker.com/2022/06/13/trend-following/

 

            Can we have a bear market when earrings are holding up?

            https://www.zerohedge.com/the-market-ear/cvc00o2lee

 

            The latest from Morgan Stanley.

            https://www.zerohedge.com/markets/debate-over-morgan-stanley-unloads-dismal-state-us-consumer

 

            Beware mean reversion (how many times have I said that).

            https://www.zerohedge.com/markets/laws-mean-reversion-have-begun-their-summer-offensive

 

    News on Stocks in Our Portfolios

 

Oracle press release (NYSE:ORCL): FQ4 Non-GAAP EPS of $1.54 beats by $0.16.

Revenue of $11.84B (+5.4% Y/Y) beats by $190M.

 

Oracle (NYSE:ORCL) declares $0.32/share quarterly dividend, 18.5% increase from prior dividend of $0.27.

 

What I am reading today

 

 

            Western self-destruction continues (must read).

https://www.nakedcapitalism.com/2022/06/western-self-destruction-continues-us-eyepoking-china-us-failed-muscling-of-latin-america-eu-commission-scheme-to-admit-ukraine-to-what-end.html

 

The problem of group think.

            https://www.realclearmarkets.com/articles/2022/06/13/the_fed_wants_to_help_you_by_making_your_poorer_and_other_delusions_836976.html

 

                        The 2022 social security trustees’ report is too optimistic.

            https://thehill.com/opinion/finance/3518875-the-2022-social-security-trustees-report-is-optimistic-and-misleading/

 

 

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