The Morning Call
7/11/22
The
Market
Technical
The good news is
that the S&P failed in its challenge of the lower boundary of its
intermediate term uptrend back on 6/21 and still has a huge gap down open that
needs to be filled. The bad news is that it remains (1) below both DMA’s, (2)
in a short term downtrend, (3) in a very short term downtrend and it (4) has
yet to make higher high. Visually you
can see the developing wedge pattern formed by the upper boundary of its very short term
downtrend and the lower boundary of its intermediate term uptrend. That is apt
to get resolved in the next two weeks as second quarter earnings get reported
and the FOMC meets. Patience.
The long bond is
attempting its third challenge of the lower boundary of its intermediate term
trading range. I await the results. That said, I continue to think that with
investors now more concerned about recession than inflation, the worst is likely
over.
In my absence, GLD
clearly got torched, likely in harmony with declining bond prices. In the
process, it voided its very short term uptrend. I put in a longer term chart to
give you a sense of where support lies. Unfortunately, it is considerably lower.
Still, it has a long way to go to break its long term uptrend. Further, sentiment
and the supply/demand dynamics for physical gold are improving. This is not the
time to be buying.
The
story remains the same---up, up and away. The dollar has reset its intermediate
term trend from a trading range to an uptrend. I used the longer term chart on
UUP also to give you an idea of future resistance. My conclusion is unchanged:
no matter how badly everyone wants the dollar to go down, as long as the globe
looks at the US as the safest place to invest, the uptrend is not apt to
change.
Friday in the
charts.
https://www.zerohedge.com/markets/commodities-crushed-bonds-battered-stocks-dollar-soar
The
latest from the Stock Traders’ Almanac
https://jeffhirsch.tumblr.com/post/689065982486085632/get-ready-for-the-quadrennial-rally
Fundamental
Headlines
The
Economy
Review of last two Weeks
Week of 6/27
The US data that
week was overwhelmingly negative as were the primary indicators (one positive, one neutral, three
negative). Overseas, the stats were slightly upbeat.
Week of 7/4
The US numbers that week were positive with
one plus primary indicator. Overseas, the
results were mixed.
The one notable headline
last week was the narrative of the latest FOMC meeting’s minutes---which were
more hawkish than anticipated. If the Fed truly follows through with its stated
policy, then I think that pretty much locks in a recession. The question now
is: how bad will it be?
Judging by the
current relative mild weakening in the data flow and the increasing likelihood
that inflationary pressures are starting to lessen, we could get a mild
recession. But that will depend on
(1) how far the
inflation rate falls. My concern here is that given the prolonged period and
the magnitude of monetary ease, that it will not be by much. In that case, to
get back to a lower stable inflation rate and a return to the Market
determining the price of risk, it would require some pretty harsh medicine from
the Fed,
(2) which brings
me to the second point: how the Fed reacts to the data. History suggests that
it will not tolerate a weakening labor market and/or a flush in the stock
market for very long before easing back irrespective of the underlying
inflation rate.
Jeffrey Snider
believes that we just need to watch the Treasuries market to know when the Fed
is starting to ease.
Of course, this is
all just speculation at this point because we do not know how deeply embedded
inflation is and we can’t say for sure that Powell won’t stand as tough as he
says that he will.
Which leaves the
outlook for the economy and, more importantly for investors’ purposes,
corporate profits murky at best. The good news is that second quarter earnings
season starts this week which will hopefully cast some light on the latter
point.
https://investorplace.com/2022/07/a-market-breakout-is-coming/?utm_source=rcm&utm_medium=editorial
In the meantime,
patience is virtue,
US
International
June
Japanese YoY machine tool orders were up 17.1% versus estimates of
+8.0%.
Other
Recession
Eight measures of a slowing economy.
https://www.nytimes.com/2022/07/08/business/economic-indicators-showing-slowdown.html
A cascade of defaults is coming to developing
,markets.
China has similar problems.
https://www.ft.com/content/3339c433-c441-40fb-b334-72a057f40ea0
Consumer credit hits a brick wall.
https://www.zerohedge.com/markets/consumer-credit-hits-brick-wall-credit-cards-maxed-out
Bottom line
More on valuation.
Why Goldman is buying every barrel of oil it
can find.
https://www.zerohedge.com/commodities/why-goldman-buying-every-barrell-oil-it-can-find
News on Stocks in Our Portfolios
What
I am reading today
Visit Investing
for Survival’s website (http://investingforsurvival.com/home)
to learn more about our Investment Strategy, Prices Disciplines and Subscriber
Service.
No comments:
Post a Comment