The Morning Call
8/21/23
The
Market
Technical
The S&P struggled
through its third down week---negating its very short-term uptrend and resetting
its 50 DMA from support to resistance.
The only question now is where it finds support. I have suggested three possibilities: (1) its
100 DMA [~4296], (2) the lower boundary of its short-term uptrend [~4168] and
(3) its 200 DMA [~4139]. The universe of the stock boys is convinced
that this is just a sell off in a bull market; though the stats supporting the
economic justification (inflation in the rear-view mirror accompanied by a soft
landing) for that position remains a bit iffy.
But a sell-off down to its 100 DMA (about 5%) would be perfectly normal
in that scenario. The task now is to
wait till the S&P finds support, evaluate any new economic data then make
an educated guess based on the dataflow whether or not, this is indeed a
selloff in a bull market. You know that
I am skeptical; but if it continues to appear that scenario is unfolding, I
will put some money to work.
The
last time this happened.
https://allstarcharts.com/last-time-up-here-prices-got-cut-in-half/
In
the meantime, on a very short-term basis, stocks have become oversold:
Here
comes the next squeeze.
Most oversold in a
long time.
https://www.zerohedge.com/the-market-ear/oversold-pic
More.
https://www.zerohedge.com/the-market-ear/only-5-down-and-some-things-flashing-oversold-already
8/21/23
The
Market
Technical
The S&P struggled
through its third down week---negating its very short-term uptrend and resetting
its 50 DMA from support to resistance.
The only question now is where it finds support. I have suggested three possibilities: (1) its
100 DMA [~4296], (2) the lower boundary of its short-term uptrend [~4168] and
(3) its 200 DMA [~4139]. The universe of the stock boys is convinced
that this is just a sell off in a bull market; though the stats supporting the
economic justification (inflation in the rear-view mirror accompanied by a soft
landing) for that position remains a bit iffy.
But a sell-off down to its 100 DMA (about 5%) would be perfectly normal
in that scenario. The task now is to
wait till the S&P finds support, evaluate any new economic data then make
an educated guess based on the dataflow whether or not, this is indeed a
selloff in a bull market. You know that
I am skeptical; but if it continues to appear that scenario is unfolding, I
will put some money to work.
The
last time this happened.
https://allstarcharts.com/last-time-up-here-prices-got-cut-in-half/
In
the meantime, on a very short-term basis, stocks have become oversold:
Here
comes the next squeeze.
Most oversold in a
long time.
https://www.zerohedge.com/the-market-ear/oversold-pic
More.
https://www.zerohedge.com/the-market-ear/only-5-down-and-some-things-flashing-oversold-already
You don’t need me
to tell you what an ugly looking chart this is.
It is telling us that the Goldilocks scenario is bulls**t. You will also note that TLT is five percent
away from the lower boundary of its long term trading range. If that barrier is broken, then bonds are likely
in for a world of hurt. I am not predicting
that will occur. But clearly how the
long Treasury behaves around this boundary will say a lot about bond investors’
opinion of our economic outlook. I will
be paying close attention to the pin action in the week (s?) ahead.
TIPS
versus gold.
http://scottgrannis.blogspot.com/2023/08/tips-vs-gold-which-is-better-inflation.html
GLD continued to
sell off and in the process is now challenging its 200 DMA. None of this surprising. As I have noted in
the past, gold usually moves inversely with interest rates, so a sell-off in
the face of rapidly rising rates is to be expected.
The dollar was up again---making its way to the
upper boundary of its short-term uptrend.
I think that as long as interest rates are on the rise, the dollar will
follow.
Friday in the
charts.
https://www.zerohedge.com/markets/worst-week-stocks-banking-crisis-bonds-bitcoin-bullion-battered
Fundamental
Headlines
The
Economy
Last Week Review
Not
many US datapoints last week. What we
got was positive. Primary indicators
were two positive, two neutral. Overseas, the data was very negative.
The
results continue mixed---one week positive, one negative---indicating a less
than enthusiastic support of both the Markets’ takeaway and the consensus among leading economists that (1) inflation
is in the rear-view mirror and (2) we will get a ‘soft’ landing.
Two
other factors worth mentioning are (1) the continued deterioration in the Chinese
economy, the world’s second largest and (2) the aforementioned push higher in
interest rates. Granted they are
somewhat contradictory---economic weakness/low interest rates/disinflation in
China versus higher rates/concerns about higher inflation in the US. I think these developments simply emphasize economic
uncertainty and not the seeming slam dunk Goldilocks scenario.
China’s
hidden financial dangers.
More
on China’s problems
https://www.zerohedge.com/the-market-ear/crying-china
How
much will China’s slowdown impact the US economy?
For
the moment, I am sticking with my recession forecast though (1) my conviction
remains weak and (2) if there is one, I have no idea of its magnitude.
I
am also maintaining my position that the Fed loosens at the first sign of
trouble. However, the pin action in the bond
market is making that assumption increasingly questionable.
What
it does do is increase the odds of the one scenario that would screw almost all
investors/forecasters/current elected officials, i.e., either the Fed sticks to
its guns (made necessary by a lack of improvement in the inflation stats),
pushing the economy into a rough recession or the economy falls into a severe
recession of its own accord weighted down by years of monetary/fiscal
mismanagement. I have said that I don’t
think that will happen, but it is becoming more likely by the day.
Consumer
savings are running out.
Longer
term, irrespective of how low inflation goes in the short term, irrespective of
whether or not we have a recession and if so, how deep it will be, we are still
faced with an economy growing at well below its historic secular rate and a
base rate of inflation above 2%.
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
July German PPI came in at -1.1% versus estimates
of -0.2%.
Other
Recession
Large banks are losing deposits and reducing
loan volume.
Bottom line
The latest from BofA.
Hartnett:
"Shocking. Positively Shocking" | ZeroHedge
News on Stocks in Our Portfolios
FedEx (NYSE:FDX) declares $1.26/share quarterly dividend, in line with previous.
What
I am reading today
Fourth of July celebration earns Guinness
World Record.
The psychological immune system.
******************************************************************************
Visit Investing
for Survival’s website (http://investingforsurvival.com/home)
to learn more about our Investment Strategy, Prices Disciplines and Subscriber
Service.
You don’t need me to tell you what an ugly looking chart this is. It is telling us that the Goldilocks scenario is bulls**t. You will also note that TLT is five percent away from the lower boundary of its long term trading range. If that barrier is broken, then bonds are likely in for a world of hurt. I am not predicting that will occur. But clearly how the long Treasury
behaves around this boundary will say a lot about bond investors’ opinion of our economic outlook. I will be paying close attention to the pin action in the week (s?) ahead.
TIPS
versus gold.
http://scottgrannis.blogspot.com/2023/08/tips-vs-gold-which-is-better-inflation.html
GLD continued to
sell off and in the process is now challenging its 200 DMA. None of this surprising. As I have noted in
the past, gold usually moves inversely with interest rates, so a sell-off in
the face of rapidly rising rates is to be expected.
The dollar was up again---making its way to the
upper boundary of its short-term uptrend.
I think that as long as interest rates are on the rise, the dollar will
follow.
Friday in the
charts.
https://www.zerohedge.com/markets/worst-week-stocks-banking-crisis-bonds-bitcoin-bullion-battered
Fundamental
Headlines
The
Economy
Last Week Review
Not
many US datapoints last week. What we
got was positive. Primary indicators
were two positive, two neutral. Overseas, the data was very negative.
The
results continue mixed---one week positive, one negative---indicating a less
than enthusiastic support of both the Markets’ takeaway and the consensus among leading economists that (1) inflation
is in the rear-view mirror and (2) we will get a ‘soft’ landing.
Two
other factors worth mentioning are (1) the continued deterioration in the Chinese
economy, the world’s second largest and (2) the aforementioned push higher in
interest rates. Granted they are
somewhat contradictory---economic weakness/low interest rates/disinflation in
China versus higher rates/concerns about higher inflation in the US. I think these developments simply emphasize economic
uncertainty and not the seeming slam dunk Goldilocks scenario.
China’s
hidden financial dangers.
More
on China’s problems
https://www.zerohedge.com/the-market-ear/crying-china
How
much will China’s slowdown impact the US economy?
For
the moment, I am sticking with my recession forecast though (1) my conviction
remains weak and (2) if there is one, I have no idea of its magnitude.
I
am also maintaining my position that the Fed loosens at the first sign of
trouble. However, the pin action in the bond
market is making that assumption increasingly questionable.
What
it does do is increase the odds of the one scenario that would screw almost all
investors/forecasters/current elected officials, i.e., either the Fed sticks to
its guns (made necessary by a lack of improvement in the inflation stats),
pushing the economy into a rough recession or the economy falls into a severe
recession of its own accord weighted down by years of monetary/fiscal
mismanagement. I have said that I don’t
think that will happen, but it is becoming more likely by the day.
Consumer
savings are running out.
Longer
term, irrespective of how low inflation goes in the short term, irrespective of
whether or not we have a recession and if so, how deep it will be, we are still
faced with an economy growing at well below its historic secular rate and a
base rate of inflation above 2%.
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
July German PPI came in at -1.1% versus estimates
of -0.2%.
Other
Recession
Large banks are losing deposits and reducing
loan volume.
Bottom line
The latest from BofA.
Hartnett:
"Shocking. Positively Shocking" | ZeroHedge
News on Stocks in Our Portfolios
FedEx (NYSE:FDX) declares $1.26/share quarterly dividend, in line with previous.
What
I am reading today
Fourth of July celebration earns Guinness
World Record.
The psychological immune system.
******************************************************************************
Visit Investing
for Survival’s website (http://investingforsurvival.com/home)
to learn more about our Investment Strategy, Prices Disciplines and Subscriber
Service.
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