The Morning Call
11/20/23
I am taking the week of Thanksgiving
off. Have a great holiday.
The
Market
Technical
The S&P moonshot
continued last week, resetting its 100 DMA from resistance to support and
voiding its very short term downtrend.
The good news is that the next stop appears to be circa 4607. The bad news is it now has three huge gap up
opens that need to be filled. That doesn’t
preclude the continuation of this seasonal rally---but if it occurs, it suggests
some rough going in early 2024 as stocks work to close those gap opens. In short, investors may want to trade this
uptrend; but I am not going to make any long term investment decisions until
those gaps are filled.
The long bond also
maintained its upward trajectory, resetting its 50 DMA from resistance to
support. Like the S&P it has gap up
opens to fill. But unlike the S&P (1)
the magnitude of its recent advance is much less and (2) it is close to a 20
year low versus the S&P which is near its all-time high. So it is easier to imagine much less volatility
and much more upside for TLT than the S&P.
That is not a Buy recommendation, but it could turn into one with the
closing of those gap up opens.
GLD was up for the
week but on two gap up opens, suggesting more backing and filling. I still see no reason to jump into gold until
it successfully challenges its all-time high (the zone around the horizontal
black line near the top of the chart).
The dollar continued its retreat after unsuccessfully
challenging the upper boundary of its short term uptrend. It also reset its 50 DMA from support to
resistance. Still UUP is in short and intermediate term uptrends, above its 100
and 200 DMAs and has the upward magnetic pull of that huge gap down open. So for the moment, I see no reason to assume that
any kind of directional change is in the offing. However, if the dollar is reversing course to
the downside that would be good for equities.
https://allstarcharts.com/the-dollar-bends-down-low/
Friday in the
charts.
Volatility hitting a ‘natural floor’.
https://www.zerohedge.com/the-market-ear/hitting-natural-floor-volatility-inverse-fear-kicks
Fundamental
Headlines
The
Economy
Last Week Review
Last
week’s economic stats were very positive as were the primary indicators (four
plus, one minus). More important was the
picture that they painted: declining inflation but no falloff in economic activity. Did someone say ‘Goldilocks’?
I
think that the consensus is probably right about inflation---it is likely in
the rear view mirror, at least for the short to intermediate term. However, I am sticking with my ‘I don’t have
a clue’ outlook on economic growth---which is to say that I remain in doubt as
to whether we get a soft, no or hard landing.
The
good news, of course, is that one of the major uncertainties plaguing the Market
has likely been resolved. The bad news
is that investors also seem to think that the other has been (no recession) which
I believe may be incorrect and would therefore lay the groundwork for an
unpleasant surprise.
So,
my short/intermediate term outlook---a directionless economy with no clear
answer as to whether we get a soft, no or hard landing but with inflation (more
Fed rate hikes) likely behind us.
More
important, the longer term issue remains---a grossly irresponsible fiscal
policy which if left unresolved will ultimately push interest rates and
inflation to higher levels and impede the economy’s ability to grow.
Democrats
Should Start Worrying About The Deficit. - RIA (realinvestmentadvice.com)
We are faced with an economy growing at well below its historic secular
rate and a base rate of inflation above 2%.
Correcting that 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
September EU construction output fell 0.3%
versus estimates of +1.5%.
The October German PPI was -0.1%, in line.
Other
Recession
Recession alert weekly economic index.
Bottom line
The latest from BofA.
https://www.zerohedge.com/markets/hartnett-start-fading-rally-and-12-angry-trades-2024
News on Stocks in Our Portfolios
FedEx (NYSE: FDX)
declares $1.26/share quarterly dividend, in line with previous.
Fastenal
(MADDAQ: FAST) declares $0.38/share special dividend.
What
I am reading today
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