3/25/24
The Market
Technical
The S&P spent the week hugging its very short
term uptrend. This follows a break in the prior week which was then followed by
a quick resetting of the uptrend. That leaves all of its uptrends and DMAs in
support mode. So, the assumption has to be for continued upward momentum. The
only negative is that large gap up open below that needs to be filled.
I continue to hold my IWN trading position.
When the Fed cuts rates and the
economy is improving, stock prices go up.
After convincing the Markets that it would stay
tighter for longer, the Fed executed another of its statue of liberty, double
half back up the middle, fake punt, hook and lateral trick plays and went
dovish a mere week later. Despite the (not so) surprising development, the long
bond remained in downtrends across all time frames and only barely eked out a
move above its 100 DMA. That challenge won’t be deemed successful unless it remains
there through the close on Tuesday. It is also near challenges of both its 50
and 200 DMAs. However, at the moment, follow through is the most important factor.
Let’s see how it does.
GLD spent a second week consolidating in what I thought
was a fairly healthy manner. It still has those two gap up opens that need to
be filled; but its current narrow trading range suggests that gold has seen a
major breakout. This upbeat performance puts GLD at odds with stocks, bonds,
and the dollar; but I continue to hold a small position in GDX---the gold
miners ETF.
The dollar had another good week. You may recall
that in the prior week the Fed pinky promised to stay tighter for longer---which
helped the dollar. Last week, Powell promised not to overdo it---which also helped
the dollar. It negated a very short term downtrend, reset its 50 DMA from resistance
to support, reset its short term downtrend to a trading range and appears to be
ready to challenge its 100 DMA. Cleary, a dramatic turn around and one that
suggests a perfect noninflationary landing. Color me highly skeptical but I am
not going to fight the tape. Be careful not to get bulled up.
Friday in the charts.
https://www.zerohedge.com/markets/powell-put-saves-stocks-bonds-pummels-crude-crypto
Fundamental
Headlines
The Economy
Week
in review
Last week’s stats followed their recent see saw
pattern----this time upbeat overall and in the primary indicators (three
positive, no neutral, no negative). That what helped investor attitude which is
generally jiggy with the outlook for growth. I am still not convinced, especially
in light of the trend of late towards downward revisions of the prior months
numbers. At the moment, I see no reason to back off my recession call.
Bottom line:
(1)
the overall economic outlook remains unclear,
(2)
I am not altering my inflation forecast [i.e., inflation
in the rear view mirror] ---although the numbers keep getting worse and the Fed
keeps sending mixed signals. Speaking of which, the latest FOMC meeting provided
something for everyone---a neutral statement, a hawkish ‘dot plot’ and a dovish
Powell presser.
My primary concern
remains that an easing in monetary policy will only amplify the impact of a
grossly irresponsible fiscal policy which if left unresolved will ultimately
push interest rates and inflation to even higher levels, risking a tighter
monetary policy and impeding the economy’s ability to grow. (must read)
And speaking of
grossly irresponsible fiscal policy, here is your FY 2024 budget.
(3) the question of
recession [what kind of landing] remains a bit murky, especially with the constant
downward revisions in the data. As you know, my forecast had been for some type
of growth problem which I have considered changing. But not yet.
The latest nowcast.
https://www.capitalspectator.com/us-q1-growth-nowcast-ticks-down-suggests-expansion-is-slowing/
US
February building permits were up 2.4% versus
consensus of +1.9%.
The February Chicago national activity index was reported
at +0.05 versus predictions of -0.9.
International
January Japanese leading economic indicators came in
at 109.5 versus estimates of 109.9.
Other
Hotel occupancy rate decreased YoY.
https://www.calculatedriskblog.com/2024/03/hotels-occupancy-rate-decreased-14-year.html
The Financial System
The
rising risk of financial repression.
https://www.ft.com/content/4ebe5314-8522-4414-9b65-88bede1b1c3e
Geopolitics
The
real meat grinder just started.
https://www.zerohedge.com/geopolitical/escobar-its-war-real-meat-grinder-starts-now
Bottom line
S&P dividend futures signal potential turbulence.
https://politicalcalculations.blogspot.com/2024/03/quarterly-s-500-dividend-futures-rise.html
The latest from Morgan
Stanley.
News on Stocks in Our Portfolios
What I am reading today
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