The Morning Call
10/2/23
The
Market
Technical
Last week, the S&P
reset its 100 DMA from support to resistance (not good). On the other hand, it traded
right down to the lower boundary of its short-term uptrend and bounced. Clearly,
a positive. The question is, will it rally just enough to close that big gap
down open from the prior week or is the worst over? Bear in mind that we are
still in that transition between the most negative late September/early October
seasonal period and the most positive holiday/Santa Claus rally---made more
uncertain by the fallout from Powell’s post-FOMC ‘higher for longer’ message. Follow
through.
The latest from
Goldman’s trading desk.
Time for the next
leg higher in tech?
https://www.zerohedge.com/the-market-ear/magnificent-7-time-next-leg-higher
Like equities, the
long Treasury challenged an important support level (in this case the lower boundary
of its long-term trading range) and failed to break through. I think it more
significant because the support level it tested was that of a longer-term trend.
As I noted last week: 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. Finally, and again like equities, the gap
down open from the prior week needs to be filled.
Gold took it in
the chops last week---two gap down opens, resetting its 200 DMA from support to
resistance and not a sign of a bounce. I was a bit surprised by the pin action because
usually lower interest rates (the bounce in TLT) and a weaker dollar (see
below) are usually a plus for GLD. Likely it was just reflective of the general
level of confusion among investors regarding the course of inflation and
recession and the Fed’s response thereto.
The dollar backed off a bit last week, though
it was hardly surprising given its two month rocket ride and the fact that it
had pushed above the upper boundary of its short-term trend. I remind you that usually
a strong dollar is not a plus for stocks.
Friday in the
charts.
Three more charts
to watch.
https://www.zerohedge.com/the-market-ear/3-big-charts-we-are-watching
Fundamental
Headlines
The
Economy
Last Week Review
Lots
of data last week, mostly negative, though the primary indicators were balanced
(one positive, four neutral, one negative). So, not overwhelmingly downbeat,
leaving us in need of follow through to establish a trend and dispel the
current uncertainty overhanging the economy/Market. 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.
Therefore,
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%.
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
The September Chinese
manufacturing PMI came in at 50.2 versus 50.0; the nonmanufacturing PMI was
51.7 versus 52.0; the composite PMI was 52.0 versus 52.6; the September Chinese
Caixin (small business) manufacturing PMI was 50.6 versus 51.2; the nonmanufacturing
PMI was 50.2 versus 52.6; the composite PMI was 50.9 versus 53.0; the September
Japanese manufacturing PMI was 45.5 versus 48.8; the nonmanufacturing PMI was
27.0 versus 24.0; the September German manufacturing PMI was 39.6 versus 39.8;
the September EU manufacturing PMI was 43.4, in line; the September UK
manufacturing PMI was 44.3 versus 44.2.
Other
The Fed
Time to rein it in.
https://www.zerohedge.com/political/time-end-fed-and-its-mismanagement-our-economy
Government Shutdown
DC high jinks.
Bottom line
The latest from BofA
https://www.zerohedge.com/markets/its-such-fine-line-michael-hartnetts-big-15-charts
Morgan Stanley: Market starting to question
‘higher for longer.’
https://www.zerohedge.com/markets/michael-wilson-market-beginning-question-higher-longer-narrative
News on Stocks in Our Portfolios
What
I am reading today
This winter is going to be
different.
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