The Morning Call
4/17/23
The
Market
Technical
The S&P had a
decent week, sustaining the recent upward momentum. This despite a news flow
suggesting (1) a hard landing is a growing possibility and (2) the Fed is not
through fighting inflation. 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.
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.
Latest sentiment
readings.
https://www.bespokepremium.com/think-big-blog/sentiment-back-to-the-20s/
On the other hand,
the long bond had a punk week (1) falling back below its recently reset 200 DMA
[if it remains there through the close on Tuesday, it will revert back to
resistance] and (2) appears ready to challenge its 100 DMA. And as I noted last
week, it has failed for the fourth time to push above the high set back in December.
So like stocks, it appears directionless likely due to the uncertainty
regarding the economy and inflation---though clearly it has a more negative
tilt than equities.
Gold was having a great week until fears of more rate hikes slammed it on Friday. Nonetheless, it was up for the week. It clearly is still struggling to break above its all-time high---which means that the power of resistance in that all time high coupled with the downward pull of all those gap up opens are having their effect. Until (unless) GLD can overcome those forces, it will remain a stagnant asset.
https://www.zerohedge.com/the-market-ear/golds-bid
The dollar continued
to weaken. Though it did manage to bounce off the lower boundary of its
recently reset short-term trading range. Assuming that it remains within that
trading range, then like stocks, bonds and gold, it is likely reflecting
current investor uncertainty.
Friday in the
charts.
https://www.zerohedge.com/markets/hawkish-fedspeak-stagflation-scares-spark-big-reversal-markets
Fundamental
Headlines
The
Economy
Last Week Review
The
US stats last week were slightly negative with the primary indicators evenly divided
(one plus, one neutral, one negative). I wouldn’t call that result a
continuation of the very negative data from the prior week; but it is also
clearly not a reversal. So, I continue to feel comfortable with my below average
long term secular growth rate forecast. Near term it is looking increasingly
like a recession (and likely not a soft landing) is in the cards. (must read)
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
The
April NY Fed manufacturing index came in at 10.8 versus estimates of -18.0.
International
Other
Inflation
Breakeven inflation
rates refuse to roll over.
https://allstarcharts.com/breakeven-inflation-rates-refuse-to-roll-over/
Recession
Earnings season arrives
with recession fears front and center.
https://www.nytimes.com/2023/04/13/business/dealbook/earnings-season-recession-stock-market.html
Commercial real estate will crush the economy.
Recession risk grows.
Geopolitics
How much longer is the US taxpayer going
to line the pockets of corrupt Ukrainian
officials?
Bottom line
The
latest from BofA.
News on Stocks in Our Portfolios
What
I am reading today
What the Bud
Light fiasco reveals about the ruling class.
https://brownstone.org/articles/what-bud-light-fiasco-reveals-about-ruling-class/
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