The Morning Call
9/26/22
The
Market
Technical
The S&P convincingly
blew through the lower boundary of its intermediate term uptrend and reset to a
trading range. The question now is, how low will it go? Here are some markers
of support: (1) the 6/13 low [~3628]---minor support, (2) the initial 50% Fibonacci
retracement level [~3507], (3) the initial 61.8% Fibonacci retracement level
[~3198] and (4) the newly established lower boundary of its intermediate term
trading range [~2788]. I will not think about buying until the S&P either
bounces hard or touches levels (2) thru (4). In the meantime, stocks are
getting oversold; so, do not be surprised if we get a short term bounce.
Patience remains a
virtue.
Rate cuts may be the best signal of a Market
bottom.
https://www.capitalspectator.com/when-will-stocks-hit-bottom-rate-cuts-may-be-the-best-signal/
As you can see,
the long bond is nearing the lower boundary of its long term uptrend. It is now
in an intermediate term downtrend, in a short term downtrend and below both
DMA’s. I think that the long term trend will hold but I am not betting any
money on it at this point. Stay tuned.
Gold continued its
decline though technically it is in better shape than either stocks or bonds. Still
with bonds cratering and dollar on a sizz, I can’t come up with a good reason
to assume higher gold prices.
The dollar is now
within a short hair of a fifteen year high. While it clearly has momentum for a
further push higher, the contrarian opinionist in me is raising a warning flag.
Again, I am not betting any money on a reversal; but UUP has reached a point
where things could start to break. It may take more upside, but this chart says
to me that it is no time to be taking risk. Note that it could fall a huge
amount and not jeopardize it intermediate term uptrend.
Friday in the charts.
https://www.zerohedge.com/markets/crash
Currency and bond
turbulence.
https://www.zerohedge.com/the-market-ear/movehuge
Fundamental
Headlines
The
Economy
Review last week
The
US data last week were slightly negative though the primary indicators were
balanced (one positive, one neutral, one negative). The international stats were
extremely downbeat. That said, we are in one of those periods where some good
news is bad news (stronger than expected economic growth) and some bad news is
good news. (weaker than anticipated economic growth). So, these numbers have
less positive correlation with the Market outlook than under ordinary circumstances.
The
principal headline was, of course, the FOMC meeting, the results of which were
quite negative---tighter for longer. With that, recession has become the markets’
bete noir. Inflation is still a concern but only the extent that it forces the Fed
to stay even tighter for longer.
We
still don’t have the answer to my Number one question: how deeply
embedded is inflation in our economy? But investors appear to the assuming the
answer to question two: how firm will the Fed remain in its policy decisions to
bring the inflation rate back to acceptable levels? Which is to say, they
expect the Fed to hang tough to the end, i.e., until it is sure that inflation
is or will return to the 2% level.
Unfortunately, that still leaves us staring at history---the Fed has
never, ever, ever successfully managed a transition to normal monetary policy. So,
we are faced with two scenarios (three actually if you want to believe that the
Fed will successfully negotiate the return to stable monetary policy). One, it
will stay too tight for too long and plunge the country into a severe
recession. And two, it will chicken out before inflation is squelched---which
is its historic modus operandi.
You know my
opinion: I don’t think that the Fed has the fortitude to hold firm in the face
of a faltering economy and plunging asset prices.
As for the Market,
patience remains the better part of valor.
.
US
The August Chicago
Fed national activity index came in at 0.0 versus estimates of +0.24.
International
The September German
business climate index was 84.3 versus predictions of 87.0; the September
current conditions index was 94.5 versus 96.0.
Other
Has
global demand hit a wall?
The
crisis in the UK.
https://www.zerohedge.com/markets/blain-uks-monumental-policy-mistake-how-bad-will-it-get
The
Fed
We will do enough.
https://allstarcharts.com/doenough/
Inflation
Five reasons inflation isn’t so sticky.
https://www.carsongroup.com/insights/blog/five-reasons-inflation-isnt-so-sticky/
Bottom line
Asset bubbles and forward
returns.
https://www.advisorperspectives.com/commentaries/2022/09/23/asset-bubbles-forward-returns
The era of asset
price inflation is over.
The latest from
BofA.
https://www.zerohedge.com/markets/hartnett-bond-crash-2022
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