Investing for Survival: Monday Morning Chartology

The Morning Call

2/5/24

The Market

Technical

The S&P continues its advance undaunted by a bevy of (what appeared to be) bad news---Powell’s presser and the nonfarm payrolls number. At the moment, the only visible resistance are the upper boundaries of its short term uptrend (~4993), its intermediate term uptrend (~6600) and its long term uptrend (too high to even mention).

I said last week: 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.

I see no reason to argue with the tape. As you know, I bought a position in IWN; and despite its poor performance last week, I continue to hold it.

On the other hand, this is a Market phase in which many of our holdings are likely to start trading into their Sell Half Range. When that occurs, I will act.

Still more room to run.

https://www.zerohedge.com/the-market-ear/tme-weekend-theres-room-add-more-exposure

Part two.

https://www.zerohedge.com/the-market-ear/if-you-see-bubble-ride-it

The long bond had a roller coaster week, (1) making two gap up opens, then closing both of them with a gap down open, (2) successfully challenging its 50 DMA; and is in the process of challenging its 200 DMA [if it closes above it today, it will reset to support]. In addition, just to add to the confusion, it continues to swing between inverted and uninverted. I have often said that I thought that the bond market was smarter than the stock market. Past week’s pin action belie that notion---unless uncertainty is the correct position.

GLD had a volatile but ultimately trendless last week. There is a lot of positive chatter about gold, but until it can break above its all-time high, I see no incentive to dabble 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. Clearly, there has been no directionless trading. The dollar has moved steadily from the lower left to the upper right. However, it still has a ways to go before resetting its 50 DMA or its short term downtrend. Its recent behavior is a bit of a mystery to me. Generally, a strong dollar means weak equity prices; and that hasn’t been the case. Perhaps it is just the magnetic pull of the gap down open that is causing this.

Friday in the charts.

https://www.zerohedge.com/markets/mega-cap-melts-moar-despite-powell-punch-face-regional-bank-rout

Three more to consider.

https://www.zerohedge.com/the-market-ear/3-charts-we-are-watching-rising-rates

Fundamental

Headlines

The Economy

Week in review

The stats in the US were mixed though the positive primary indicators outnumbered the negative two to naught. This included a stunningly higher than expected nonfarm payrolls reading. This more or less continues an infant streak of upbeat readings---which, as I noted last week, suggest the hard landing scenario (i.e., recession) is the least likely alternative. Meanwhile, overseas the data was overwhelmingly to the plus side.

But there is one caveat:

https://www.zerohedge.com/economics/inside-most-ridiculous-jobs-report-recent-history

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: no recession. We still are not at the point that I am ready to alter my forecast; but we are close. Clearly that is a more upbeat outlook for the economy.

The $64,000 question is ‘what does it mean for equities?’ Judging by the Market’s reaction to Powell’s comments in his FOMC presser and the nonfarm payroll number, the news flow apparently doesn’t matter. Right now, investors appear convinced of a ‘soft landing’ whatever the Fed or the data say. Until that changes good news is good news and bad news is good news (for stocks).

Retirement Savers Are Piling Into Stocks. Is That A Good Idea? - RIA (realinvestmentadvice.com)

International

The December German trade balance was E22.2 billion versus projections of E18.8 billion; the January services PMI was 47.7 versus 47.6; the January composite PMI 47.0 versus 47.1.

The December EU PPI was -0.8%, in line; the January services PMI was 48.4, also in line; the January composite PMI was 47.0, also in line.

The January UK services PMI was 54.3 versus estimates of 53.8; the January composite PMI was 52.9 versus 52.5.

The Fed

Powell reinforces hawkish Fed stance on ’60 Minutes’.

https://www.zerohedge.com/markets/powell-tells-60-minutes-fed-not-likely-cut-march

Waiting for rate cuts.

https://www.ft.com/content/5c24ea81-c480-45b7-8e28-e33564b62eaf

Fiscal Policy

The senate does what it does best---screw Americans.

https://www.zerohedge.com/political/senate-deal-allows-15-million-illegals-year-slides-23b-ngos-trafficking-them-and-gives

Inflation

What is the right level of inflation?