The Morning Call
4/10/23
The
Market
Technical
The S&P was up
slightly last week, sustaining the recent upward momentum. This despite a news
flow suggesting a hard landing is still a possibility. In addition, it remains above both DMA’s and
has made a higher low. The only real
technical negative is that gap up open made back on 3/28. That aside, I see no reason that the index
won’t attempt a challenge the 50% Fibonacci retracement level (~4200). Until/unless that occurs, the S&P is in a
trading no man’s land which likely reflects investors uncertainty about the
direction of the economy.
On the other hand,
I still believe that we have not seen the worst regarding the economy or
inflation and by implication, therefore, the Market. But clearly, at the moment, I am on the wrong
side of the trade.
Sentiment back to
bullish.
https://www.bespokepremium.com/think-big-blog/sentiment-back-to-bullish/
The long bond had
a good week in which it reset its 200 DMA from resistance to support. So, clearly, it has some upside momentum.
That said, as you can see, it has failed to successfully push above its current
price level on three prior occasions.
And the inability to move higher will negate any near-term chance of
moving to challenge its short and intermediate term downtrends. So, like
stocks, bonds seem to be meandering about awaiting clarity on the direction of
the economy and inflation.
Gold pushed above
the level of its all-time high for the third time. The obvious question is, will this time be a
charm. If so, there is likely a lot of
upside from current levels. Working
against that thesis are those multiple gap up opens that still need to be
filled. If that magnetic force proves powerful
enough, then GLD will remain a stagnant asset.
However, the ball is in the bulls’ court---gold has risen above its all-time
high. Follow-through is crucial.
The dollar continued
to weaken, resetting its short term uptrend to a trading range. The question is, is the dollar telegraphing a
message that stock and bond investors are still pondering over; that is, that
there are rough economic times ahead?
Thursday in the charts.
https://www.zerohedge.com/markets/bonds-best-gold-good-banks-big-tech-bad-jobs-ugly
Fundamental
Headlines
The
Economy
Last Week Review
The
US stats last week were overwhelmingly negative, though the primary indicators
scored only one negative but two neutral.
To be sure, these stats comport with my forecast; but as I observed last
week, to date mine has not been the operative scenario, i.e. the dataflow over the
last month has been weighed to the plus side.
So, it would be quite a jump to take one week’s lousy numbers as a trend
change. Certainly, last week’s stats
could be a sign that the economy is starting to roll over; but they could also
be an outlier. We wait for more
information.
For
the moment, my forecast: 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.
Headlines
The
Economy
US
International
Other
The collapse of the dollar empire.
https://www.zerohedge.com/geopolitical/role-reversal-collapse-dollar-enforced-empire
The
Fed
The Fed needs to cut rates soon.
http://scottgrannis.blogspot.com/2023/04/the-fed-needs-to-cut-rates-soon.html
Recession
IMF warns of weak economic growth.
The
Banking System
Concern is growing over the commercial real
estate market.
https://www.nytimes.com/2023/04/06/business/commercial-real-estate-lending.html
The financial turmoil is not over.
https://www.ft.com/content/8951f7fe-43af-49d9-8641-a0d79bbd5bda
The credit crunch arrives.
Sudden fire
sale of real estate loans.
Bottom line
The latest from
Jeremy Grantham.
The seven virtues
of great investors.
https://jasonzweig.com/the-seven-virtues-of-great-investors/
Playing for
tomorrow.
https://www.capitalallocators.com/playing-for-tomorrow/
News on Stocks in Our Portfolios
What
I am reading today
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