The Morning Call
2/14/24
The
Market
Technical
Tuesday in the
charts.
https://www.zerohedge.com/markets/cpi-surprise-breaks-arm-routs-russell-busts-bonds-batters-bullion
Note: yesterday’s market sell off was triggered by
the hotter than anticipated CPI number. Couple of points.
(1)
overvalued markets/stocks tend to remain that way
until some unexpected event punches investors in the mouth, prompting a
valuation reassessment. That appears to be what is occurring,
(2)
that said, there are some questionable aspects to
the CPI reading, in particular ‘owners’ equivalent rent’ which accounts for a
major segment of CPI. While this stat has been trending down and will continue
to do so [it is reflective of data that is nine to twelve months old. So we are
fairly confident of future reports], it was unexplainably higher than
anticipated in this latest number. So far there is no explanation as to why. But
the point here is that this datapoint is something of an outlier,
(3)
whether or not the CPI reading was a good/valid
indication of underlying inflation, it makes Powell/the Fed look like geniuses
in their latest ‘wait and see’/hawkish stance. It also, at least for the
moment, belies the commonly accepted adage that the Market accurately reflects
the sum of all that is knowable. Powell told the Market there was a reason for
going slow in easing monetary policy and was rebuffed. [By the way, this doesn’t
change my attitude about its {lack of} policy making capabilities. A broken
clock is right twice a day.]
(4)
I noted in the Monday Morning Chartology: The
long bond was down again last week, successfully challenging its 200 DMA (now
resistance). The yield curve is again inverted which seems to fly in the face
of a powerful equity market (i.e., higher short term rates are generally not
good for equities). This just adds to my consternation over the astronomical
valuations of the Mag 7 and the lack of breadth in the equity market. I am not
sure what the bond guys are thinking. Now we know what they were thinking. Score
another one for the bond guys.
(5)
the S&P made a gap down open, bouncing down off
the upper boundary of its short term uptrend, trading below the lower boundary
of its very short term uptrend, then closing right on it. So, [a] that gap down
open needs to be filled and [b] the S&P is caught between two trend lines. One
of which has to be broken. As always in these situations, follow through is the
key.
(6)
Remember the several articles that I have linked to
that foretold a very sloppy February options expiration. We are getting in
spades.
Four more charts.
Divergences and
other technical warnings.
https://www.zerohedge.com/markets/divergences-and-other-technical-warnings
Fundamental
Headlines
The
Economy
US
Weekly mortgage
applications dropped 2.3% while purchase applications were down 3.0%.
Month to date
retail chain store sales grew at less than one-half the rate of the prior week.
International
December UK
industrial production rose 2.6% versus estimates of -0.2%; the second estimate
of Q4 GDP growth was 0.0%, in line; January CPI was 4.0% versus 4.2%; core CPI
was -0.9% versus -0.8%.
Other
The
Fed
Atlanta Fed chief says rate cuts not likely to
happen until summer.
https://www.cnn.com/2024/02/12/economy/fed-bostic-rate-cuts/index.html
Fiscal
Policy
House tax bill suggests chaos in 2025.
https://www.washingtonexaminer.com/opinion/2848573/house-tax-deal-suggests-chaos-in-2025/
Recession
Commercial real estate loans coming due in
2024 balloon to $929 billion.
Geopolitics
Ukraine starting to collapse.
https://www.nakedcapitalism.com/2024/02/ukraine-collapse-starting-what-happens-next.html
Bottom line
Are you ready for
the roaring twenties?
A very interesting
thesis on why the Market appears more expensive than it really is.
https://humbledollar.com/2024/02/fear-of-heights/
Outlook for
S&P dividend growth.
https://politicalcalculations.blogspot.com/2024/02/winter-2023-snapshot-of-future-for-s.html
News on Stocks in Our Portfolios
What
I am reading today
The
strange ignorance of the effect of price caps.
https://www.econlib.org/a-strange-ignorance-of-the-effect-of-price-caps/
Another great
idea from our ruling class.
https://nalert.blogspot.com/2024/02/biden-admin-diverts-veterans-affairs.html
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for Survival’s website (http://investingforsurvival.com/home)
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