The Morning Call
9/25/23
The
Market
Technical
The FOMC appears
to have lifted the veil of investor confusion that has existed since mid-July
when, in its meeting last week, it went hard on the ‘higher of longer’ scenario.
As a result, the S&P (1) reset its 50 DMA from support to resistance, (2)
is now challenging its 100 DMA; if it closes there today, it will reset from
support to resistance, (3) made a new lower low and (4) made a huge gap down
open on Thursday which it tried and failed to fill on Friday.
The only good short-term
news in that performance is that the gap down open still has to be filled. That
said, unless the S&P can close back above its 100 DMA today, we need to start
worrying about just how bad things could get. As I noted on Friday, the next visible
support levels are (1) the lower boundary of its short-term trend [~4248] and (2)
its 200 DMA [~4190].
Goldman says pain
trade is now to the upside.
From ‘sad
September’ to ‘optimistic October.’
https://www.zerohedge.com/the-market-ear/sad-september-optimistic-october
As you can see,
the long bond made an equally impressive gap down open on Thursday---making an
ugly chart just that much worse and leaving TLT near the lower boundary of its long-term
trading range (~88.03). If that support level fails, then the chart goes from
ugly to frightening and I will sell and take a licking on that small TLT
position I initiated several weeks ago. Again, the only good news is that gap
down open needs to be filled.
GLD had another
flat week, though it also enjoyed the volatility experienced by stocks and
bonds. While it managed to close the two gap opens from the prior week, it then
created a brand new one on Thursday. It also failed to confirm a break of its
50 DMA to the upside as well as a break of its 200 DMA to the downside. Clearly,
gold investors are having a tougher time deciding what ‘higher for longer;’
though historically, higher interest rates (lower bond prices) and a strengthening
dollar (see below) have both been negatives for gold. So, color me confused on
this chart.
The dollar continued its two-month sizz to the
upside, seemingly unperturbed by the schizophrenic trading in other sectors. As
you can see, it continues to inch closer to the upper boundary of its short-term
uptrend which should slow its rate of advance. Let’s see how it handles that
resistance. I remind you that usually a strong dollar is not a plus for stocks.
Friday in the
charts.
https://www.zerohedge.com/markets/higher-longer-reality-check-wrecks-bonds-banks-big-tech
Three more charts
to watch.
https://www.zerohedge.com/the-market-ear/3-charts-we-are-watching-huge-levels-make-or-break
Fundamental
Headlines
The
Economy
Last Week Review
It
was another relatively slow week for US data. What there was was negative
though the primary indicators were balanced (one, one and one). This keeps the
lack of a trend in place. We need follow through to establish a trend and
dispel the current uncertainty overhanging the economy/Market. Unfortunately,
we simply don’t have that right now. In short, the issues of whether or not (1)
inflation is in the rear-view mirror and (2) we will get a ‘soft’ landing are
not settled.
The
main event of the week was the FOMC meeting in which it left rates unchanged
but moved its ‘dot plot’ to a more hawkish stance. I will leave you to
interpret that action as you want. Mine is that until the Fed proves it is operating
on anything other the WAG (wild ass guess) method, assuming you know what the Fed
is going to do is a fool’s bet.
Dots:
stabs in the dark without any substance.
What
the Fed is overlooking.
https://scottgrannis.blogspot.com/2023/09/what-fed-is-overlooking.html
So,
there is really no reason to alter my recession forecast. My conviction remains
weak and the last couple of weeks haven’t helped. I am also maintaining my
position that the Fed loosens at the first sign of trouble.
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%.
"That
70s Show" - RIA (realinvestmentadvice.com)
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
The August Chicago
national activity index was -.16 versus estimates of +.15.
International
The September
German business climate index came in at 85.7 versus consensus of 85.2; the
September current conditions index was 88.7 versus 88.0.
Other
Recession
Pray and delay is back as debt costs soar.
https://www.semafor.com/article/09/21/2023/pray-and-delay-is-back-as-debt-costs-soar
Recession alert leading economic index.
Government
Shutdown
Inching
toward a shutdown.
https://apnews.com/article/government-shutdown-mccarthy-house-republicans-spending-cuts-deff84c0e2ff7d3bd076b8c38e14cca4
Geopolitics
The
shifting Ukraine narrative.
https://www.zerohedge.com/geopolitical/seymour-hersh-mainstreams-ukraine-narrative-shift
China
The Chinese are practicing.
https://www.wsj.com/world/asia/chinas-fighter-jets-arent-just-flying-around-taiwan-theyre-practicing-d6e56cc5?mod=hp_lead_pos9&utm_campaign=What%20I%20Am%20Reading&utm_medium=email&_hsmi=275234538&_hsenc=p2ANqtz-9Lc4d0MQKCQEIcOe-j2fgny3kJuSzp-5bYn1XW5AELBuOm1aDEQpbN_4LRxWAFaYpozbJ9A_2hccSQDT0mmXQkTqEwhw&utm_content=275234538&utm_source=hs_email
Bottom line
BofA thinks that there is still more downside.
https://www.zerohedge.com/markets/hartnett-did-you-sell-last-hike
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