The Morning Call
1/29/24
The
Market
Technical
The S&P successfully
challenged the upper boundary of its intermediate term trading range, resetting
it to an uptrend. Accordingly, the only visible resistance is the upper
boundaries of its short term uptrend (~4993), its intermediate term uptrend
(~6600) and its long term uptrend (too high to even mention).
Given the economic/political/social
issues that I believe are facing us, it is hard for me to make a call for a dramatically
higher Market. But historically, stocks don’t make a new all-time high after a
two year hiatus then suddenly roll over. So it seems likely that they will climb
the proverbial ‘wall of worry’ for some length of time.
Depending on your
time horizon, there are several courses of action available. One you can bottom
fish for those few stocks that are in a Buy Range (for me Hershey and Best Buy
fit that category) or (2) you can as I suggested last week buy a Market oriented
ETF as a trade (IWM, IWN, VYM, SPRX, QQQ depending on how aggressive you want
to be; I bought a position in IWN on
Friday)
On the other hand,
this is a Market phase in which many of our holdings start trading into their
Sell Half Range. When that occurs, I will act.
Goldman guru so bullish,
he’s bearish.
The long bond meandered
about last week. I am sure bond investors are torn between the good economic growth
news (suggesting a stronger economy/profits but higher for longer) and better
inflation news (rate cuts starting in March). As you know, I believe that the
bond market is smarter than the stock market. So with the yield curve now basically
flat, if it re-inverts or steepens because short rates decline (sign of
recession), I will remain cautious. If it steepens because long rates rise
(sign of economic recovery), then I will become more optimistic.
The recent decline
in bond volatility is a plus for stocks.
https://www.zerohedge.com/the-market-ear/3-charts-bond-volatility-moving-lower-and-its-helpful-bull
GLD was also
trendless last week. The fact that it can’t successfully bust through its
all-time high suggests that investors are sanguine about the economic outlook
and provides no incentive to dapple in gold.
While
the long term uptrend remains in place, the dollar’s short term technical
picture has been wrecked. To be sure, a gap down open of the order of magnitude
shown on the chart begs to be closed. But that will likely take a long time. Expect
a lot of directionless trading over the short to intermediate term. That said, the
recent rally in the dollar accompanying the breakout in equities makes sense.
Friday in the
charts.
Fundamental
Headlines
The
Economy
Week in review
The stats in the
US were overwhelmingly upbeat last week, with the primary indicators more so (four
up, two neutral). This is only the second consecutive positive week in some
time. So while it is too soon to be altering forecasts, it does suggest that the
hard landing scenario is the least likely alternative. And since a soft or no
landing are both positive for the economy, one has to be a bit more optimistic.
Meanwhile,
overseas the data continues to vacillate between positive and negative
readings.
Bottom line:
(1)
I think that the inflation risks are behind
us, at least for the short term. However, longer term, I believe that the most
important economic factor is the potential [inflationary] impact of a grossly
irresponsible fiscal policy which if left unresolved will ultimately push
interest rates and inflation to higher levels, risking a tighter monetary
policy and impeding the economy’s ability to grow.
(2)
The question of recession [what kind of landing] is
gaining some visibility, in my opinion. That is, the continuing lack of consistently
in the data is more of an indication of a ‘muddle through’ scenario than it is
of a hard landing. So, I a shifting a bit in my outlook---downgrading the likelihood
of a hard landing and focusing on whether or not we get a soft or no landing. Clearly
that is a more upbeat outlook for both the economy and stocks.
US
International
Other
The
Fed
When reverse repos reach zero, QT will start.
Recession
Update on big four recession indicators
China
China signals more stimulus to come.
News on Stocks in Our Portfolios
What
I am reading today
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