4/15/24
The Market
Technical
The S&P took it on the nose last week,
successfully challenging its very short term up trend and approaching a
challenge of its 50 DMA. Not what you want but also not enough about which to
get worried---it remains within its short, intermediate and long term uptrends
and above all its DMAs. The only negative is that large gap up open below that
needs to be filled. I will be paying close attention to follow through.
The reflation trade lives on.
Some mega trends still intact.
https://www.zerohedge.com/the-market-ear/tme-weekend-some-mega-trends-still-look-be-intact
BofA warns of Black Monday.
The long bond’s rough ride continued, putting in
another gap down open on Wednesday. It now (1) is below all DMAs (2) has now
made four lower highs and (3) is in downtrends across all time frames, suggesting
that the bond boys are not buying lower rates (higher prices).
The bond crash continues.
https://allstarcharts.com/the-bond-crash-continues/
The secular trend in bond prices is breaking down.
https://www.zerohedge.com/markets/secular-trend-treasuries-breaking-down
GLD continued its Titan III formation, though
Friday was a mixed bag---opening up strong and selling off the rest of the day
to end in negative territory. Investors appear to be focused on inflation and
geopolitical risks, especially in the Middle East. I am feeling ever more
comfortable with a rising inflation rate scenario (see below) but who knows
what those crazy f**ks in the Middle East will do.
I bought back my GDX (gold miners ETF); but this is
a trading position and as such highly dependent on the chart and news flow.
Goldman, BofA and UBS see higher gold prices.
The dollar had a dramatic week up, successfully
challenging its 50 and 100 DMAs and commencing a challenge of its 200 DMA as
well as making two monstrous gap up opens the latter of which effectively
closed that huge gap down open from last December. Clearly, there is some force
behind this rally. Nonetheless I remain puzzled by the simultaneously strong GLD
and UUP pin action. It is probably not a good sign.
Strongest week for dollar since 2022.
https://www.ft.com/content/85f87fa4-80b0-4a94-90bc-8f7e0a00c70a
Friday in the charts.
Fundamental
Headlines
The Economy
Week
in review
Last week’s stats were weighted to the negative
side with one primary indicator neutral and one down. Despite the headline
narrative that the economy is gaining strength and lots of Fed speak
reinforcing that notion, the numbers just aren’t there. On the other hand,
there is little evidence of recession.
Indeed, this environment is reminiscent of my
pre-covid forecast of a ‘muddle through’ economy. You may recall that this had
been my outlook for an extended time prior to the Covid nonsense. And since the
main tenant that of forecast (i.e., too much government debt usurping private
capital/resources) is even worse today, it seems reasonable to me that if the
economy is returning to normal, then normal would be that which existed prior
to Covid. As a result, I am a short hair away from revising my outlook from
recession to ‘muddle through.’
The inflation data last week did not make for happy
investor reading with CPI coming in hotter than anticipated. That is the last
straw for me. Accordingly, I am abandoning my ‘inflation in the rear view
mirror’ forecast. As I noted last week, an unbelievably irresponsible fiscal
policy, a historically dovish Fed (its current hawkish noises, notwithstanding)
and the recent performance of commodities (gold, oil) and bitcoin have me thinking
that inflation may be as good (low) as it is going to get. The question now is,
how disciplined will the Fed be holding rates up in an election year.
Bottom line:
(1)
A week for changes,
(2)
I am giving up my inflation forecast [i.e., inflation
in the rear view mirror].
Others haven’t
given up.
https://gregmankiw.blogspot.com/2024/04/its-all-about-shelter.html
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.
(3) the question of
recession [what kind of landing] remains a bit murky, but I think that the
economy has shown enough strength to warrant modifying my recession forecast
slightly to a ‘muddle through’ scenario. I am not quite there; but another week
or so of inconclusive stats and I will be.
US
March retail sales were up 0.7% versus forecasts of
+0.3%; ex autos, they were up 1.1% versus +0.4%.
The April NY Fed manufacturing index was -14.3
versus projections of -9.
International
February EU industrial production rose 0.8%,
in line.
Other
The Fed
IMF
chief warns central banks against lowering rates to soon,
https://www.wsj.com/articles/imf-chief-warns-central-banks-against-cutting-too-soon-16033035
Inflation
Reflation
is here.
https://www.zerohedge.com/economics/its-official-reflation-here
Recession
Update
on Recession Alert weekly leading economic index.
Bottom line
The latest from BofA.
https://www.zerohedge.com/markets/ycc-now-inevitable-michael-hartnett-reveals-biggest-story-2020s
News on Stocks in Our Portfolios
What I am reading today
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