The Morning Call
6/12/23
The
Market
Technical
Last week, the
S&P took out 4200 (the 23.6% Fibonacci retracement level) and pushed toward
the upper boundary of its short-term trading range (~4325). Although I don’t think
that it can breach that resistance level until it fills that gap up open of two
Fridays ago. Many Market pundits are opining that a new bull market has started.
However, I don’t believe that will occur until the S&P makes a new high
(~4818). Even if that thesis is wrong, I
don’t see how one can postulate a new bull market until, at least, the S&P
can reset its short-term trend from a trading range to an uptrend. But if that
happens then I will have to start seriously questioning the correctness of my
position and start to hedge, i.e. start to nibble. The good news is that there
are a reasonable number of attractively valued stocks.
Hedging the downside hasn’t been this cheap in a while.
https://www.zerohedge.com/the-market-ear/panic-unpanic
Short covering mania.
https://www.zerohedge.com/the-market-ear/short-covering-mania
Sector rotation begins.
What happens next (must read).
The long bond had
a down week, continuing the downtrend off its fourth lower high. It seems likely
to retest the lower boundary of its intermediate term downtrend. Even if it
holds that support line, it will still have made another lower low. I think we
can thank the coming $1 trillion Treasury refinancings, the stronger than
expected US economic performance along with increasing bankruptcies in the
small cap and commercial real estate markets for the nervousness among fixed
income investors.
Gold was up for
the week but still voided its very short-term uptrend. Longer term, it remains
in intermediate and long-term uptrends but has failed three times to break
above its all-time high. That puts us into a wide trading range from which we
will get little directional information that has much value.
The dollar was
down for the week, continuing its decline after bouncing off the upper boundary
of its short-term trading range and failing a challenge of its 200 DMA (it
remains resistance). It seems a bit odd in the face of a strong stock market
and rising interest rates; but confusion remains part of the Market mix right
now.
Friday in the
charts.
https://www.zerohedge.com/markets/value-trumps-growth-week-vix-dumps-bonds-gold-jump-jobs-slump
Fundamental
Headlines
The
Economy
Last Week Review
There
were not a lot of US stats last week. What there was, was negative; though the
sole primary indicator was neutral. The international data was horrible as it
has been for almost a month. I think that likely means that the rest of the
world is sliding into recession. So, the question is either (1) how far behind
is the US? Or (2) can we scoot by with a mild or no recession at all? The
latter seems less probable. Indeed, as I repeatedly note, there are some
leading US economic indicators that are pointing towards recession. This all
keeps me stubbornly sticking with a recession forecast but hopelessly confused
about its timing and depth.
Jeffrey
Snider puts a cherry on top.
The
other issue investors must deal with is, of course, inflation. And perhaps more
importantly, how the Fed perceives this problem and even more important, just
how firm is its determination to achieve its 2% target. Clearly the stats show
a need to continue tightening. However, the Fed has proven time and again that it
is weak kneed when it comes to monetary discipline. So, I have no great
expectations that it will stick to its guns in pushing inflation back to 2%. I
would note that the June FOMC meeting is this week, which should give us more
info on this subject.
Bottom
line: I am maintaining my recession scenario (though with questionable
conviction).
Longer
term, irrespective of what happens over the next year, we are still faced with
a struggling economy growing at well below its historic secular rate.
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---which
unfortunately is not apt to happen.
The
Economy
US
International
May Japanese YoY
machine tool orders declined 22.2% versus consensus of -9.0%.
Other
The
coronavirus
The latest on the origins of the
coronavirus.
News on Stocks in Our Portfolios
Bottom line
Another bear capitulates.
And
another.
But
BofA sticks with its bearish call.
https://www.zerohedge.com/markets/hartnett-we-still-remain-bearish-because-math-does-not-add
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