The Morning Call
3/6/23
The
Market
Technical
The S&P had a
good week and an outstanding Thursday and Friday as it bounced hard off both its
100 and 200 DMA’s and regained that very short-term trend line off its October
low. That’s a lot to like short term, technically
speaking. However, it needs to make a new higher high to get jiggy about the
long term outlook. So I still look at
the S&P being in a no man’s land until breaks either 100/200 DMA or makes a
higher high. Patience.
https://www.zerohedge.com/the-market-ear/spx-above-200-stuck
Why so resilient?
https://www.zerohedge.com/the-market-ear/why-so-resilient-0
Like stocks, the
long bond finished the week with a bang---a gap down open followed by a gap up
open. As promising as Friday’s pin action appeared, TLT is still below both DMA’s
and in short and intermediate term downtrends.
So, we need some follow through before getting enthused about a move in
either direction. Like stocks, patience.
GLD rebounded
strongly last week, filling two small gap down openings---again not surprising
given a decline in long rates and the dollar.
It remains in both intermediate and long term uptrends and above both
DMA’s and that enormous gap down open from three weeks ago remains. So, it is positioned to rebound if either
economic or geopolitical landscape were to turn sour.
The dollar was
down slightly in a highly volatile week.
It continues in both short and intermediate term uptrends but below both
DMA’s. Importantly, the 100 DMA is
crossing below its 200 DMA which is not regarded as a plus by technicians. Still,
the short-term momentum is to the upside.
This rounds out my universal call for patience.
This is not a time
to be making big bets in either direction in any asset class.
Friday in the
charts.
Fundamental
Headlines
The
Economy
Last Week Review
The
stats last week were quite negative (the primary indicators one neutral, one
negative). But like the prior week, the positive indicators pointed to a more
robust economy while the negative data centered around inflation. That combo is not what the Fed (or the
Market) wants to see. Though, apparently
the stock market isn’t all that concerned.
So
while the evidence for a Fed ‘higher for longer’ scenario continued to gain
momentum, the Market seems to be in my camp---skeptical as to how long ‘longer’
is. As you know, my view is that the Fed
will ‘chicken out’/move the inflation goalpost. Jeffery Snider suggests another scenario ----that
these guys in the Fed believe that they
are so smart that they can ‘fine tune’ their way to that 2% goal without causing
higher unemployment.
But
there are signs that long rates are going to go higher which would undoubtedly
cause cognitive dissonance for the stock market.
https://allstarcharts.com/global-benchmarks-pave-the-way-for-rising-us-yields/
Bottom
line: Regrettably, years of fiscal
profligacy have left us with a debt to GDP ratio far in excess of the boundary
marked by Rogoff and Reinhart as the level at which the servicing of too much
debt negatively impacts the growth rate of the economy. And years of irresponsible monetary expansion
have led to the misallocation of resources and the mispricing of risk.
Correcting those self-inflicted wounds won’t be easy. It will take years
of fiscal and monetary restraint to do so. And that would mean less fiscal
stimulus and interest rates staying higher for longer than many now expect.
Unfortunately,
the alternative scenarios are that the Fed ‘chickens out/moves the goalpost’ or
baths in its own hubris until it is too late---meaning continuing irresponsible
fiscal and monetary policies, i.e., slower secular growth, higher secular inflation
and lower multiples. However, that would likely lead to a more
buoyant stock market, at least in the short term.
US
International
January EU retail
sales grew 0.3% versus estimates of +0.1%.
The February EU construction PMI was 47.6
versus projections of 48.2; the February German construction PMI was 48.6 versus
45.1.
Other
Inflation
Global food prices fall for the eleventh
straight month.
Bottom line
The latest from
BofA.
https://www.zerohedge.com/markets/hartnett-end-bear-market-will-coincide-credit-event
February dividends
by the numbers.
News on Stocks in Our Portfolios
What
I am reading today
Archeologists
find hidden corridor in Great Pyramid of Giza.
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