The Morning Call
9/12/22
The
Market
Technical
There is a lot to digest
in this chart.
(1) after the 100
DMA reverted to resistance in the prior week, the S&P turned right around
and pushed back through it to the upside; if it remains there through the close
on Wednesday, it will revert back to support,
(2) the S&P is
challenging the very short term downtrend off the August 16 high. If it is successful,
then it must still negotiate the initial
23.6% Fibonacci retracement level (~4200) and the upper boundary of its short term
downtrend (~4275) before making any assumption about the current downtrend
being over. If it retreats from this level, then we are once again looking at
the lower boundary of the S&P’s intermediate term uptrend/initial 38.2% Fibonacci
retracement level for support (~3817).
(3) finally, note that
there was a gap up open of Friday which will need to be closed.
We will learn a
lot about direction today and tomorrow.
The easy part of
the bounce is over.
https://www.zerohedge.com/the-market-ear/c7aduasdiw
For all appearances, the long bond has
successfully challenged the lower boundary of its intermediate term trading
range, resetting it to a downtrend. My only hesitation in making that call is
that big gap down open two Thursdays ago
together with the fundamental facts that the economy is noticeably weakening
while the Fed assures us that there is more tightening to come (meaning even
more weakness). So, I am postponing that call until the end of this week.
Gold
remains in that eighteen month trading range, bouncing off the lower boundary
of that range for the third time. There has been a lot of chatter in the media
about bonds bottoming and the dollar topping which could explain why GLD is
holding in there. However, until we see some concrete signs of either, I can’t
come up with a good reason to assume higher gold prices.
While
the dollar had a rough couple of days at weekend, I don’t see any reason to
jump on the dollar is topping bandwagon. We need a lot more deterioration in
this chart before that makes any sense---technically speaking. Plus, there is
the gap down open on Friday that needs to be filled.
What
is behind the dollar’s weakness?
https://www.zerohedge.com/markets/whats-behind-big-dollar-drop-morning-goldman-explains
Friday in the charts.
Is this a new bull
market?
https://allstarcharts.com/is-this-a-new-bull-market/
More support for
the bulls.
https://theirrelevantinvestor.com/2022/09/09/the-bullish-case/
Fundamental
Headlines
The
Economy
Review last week
The
US data last week were very negative (no primary indicators). Ditto the
international stats. The principal headline of the week was a doubling down on
the inflation fighting narrative by the Fed (Powell) and the ECB. I noted last
week that a hawkish policy by the central banks was probably not good for the
Markets; but they rallied on this news---apparently it was already priced in. That
said, I remain skeptical of central bankers
resolve to fight inflation to the death.
So,
my issues remain the same:
1. how
deeply embedded is inflation in our economy?
2. given
the answer to one., how firm will the Fed remain in its policy decisions to
bring the inflation rate back to acceptable levels?
As I noted previously,
there are enough signs that inflation has peaked to consider it a real
possibility. However, as I have also noted, that really doesn’t address the
answer to how deeply embedded it is. The issue is not peak inflation, the issue
is what has to occur to return to a ~2% regime.
In other words,
what is the answer to #2 above---which as I noted above remains open to
question, the latest actions by the central banks notwithstanding. Given that
lack of consistency and fortitude, it is too big a leap of faith for me to
assume that Powell et al have found religion and will hold firm in the face of
a faltering economy and plunging asset prices.
So, despite the
Market’s perky response to the hawkish central bank patience is the better part
of valor.
.
US
International
July UK GDP growth
was +0.2% versus consensus of +0.4%; July industrial production fell 0.3%
versus +0.4%; the July trade balance was L-7.7 billion versus L-11.7 billion.
August Japanese
YoY machine tool production rose 10.7% versus estimates of +7.0%.
Other
Household net worth experiences big drop in
Q2.
https://www.zerohedge.com/markets/us-household-net-worth-crashed-most-ever-q2
The credit cycle is weakening.
https://www.zerohedge.com/markets/credit-cycle-deteriorating-quickly
The
Fed
Will QT have any effect on interest rates or
the economy?
Recession
Recession signals abound.
https://www.zerohedge.com/personal-finance/recession-signals-abound-fed-hikes-rates
Bottom line.
Update on the
Buffett indicator
For the bulls.
https://www.advisorperspectives.com/commentaries/2022/09/08/what-if-the-bear-market-isnt-over
News on Stocks in Our Portfolios
AbbVie (NYSE:ABBV) declares $1.41/share quarterly dividend, in line with previous.
What
I am reading today
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