4/22/24
The Market
Technical
It was another punk week for the S&P. It reverted its 50 DMA from support to resistance
and appears to be about to challenge its 100 DMA (now ~4931). Still not enough
to prompt a great deal of worry, but….we need to be aware of potential downside
(i.e., support levels). Those exist at ~4674 (the 200 DMA) and ~4436 (the lower
boundary of its short term uptrend). The good news is that the S&P has now
filled that gap up open and remains above multiple support levels. The bad news
is that those multiple support levels exist at much lower levels. It is too
soon to be committing cash.
Tech titans: a bounce and then a
move down?
https://www.zerohedge.com/the-market-ear/tech-titans-bounce-now-and-then-next-move-down
The long bond’s rough ride continued, putting in
another gap down open on Monday (there are now three of them). It now (1) is below
all DMAs (2) has made four lower highs and
will likely make a fifth barring a substantial rally and (3) is in downtrends
across all time frames. Unless you like trying to guess bottoms, this is no
time to buy bonds.
GLD maintained its upward momentum though at a
vastly reduced pace. That makes sense given fears of inflation (of which I continue
to become more convinced) and geopolitical turmoil.
I continue to hold my GDX (gold miners ETF).
The dollar had a flattish week, though it did
confirm its successful challenge of its 200 DMA (now support). I remain somewhat puzzled by the dollar’s strong
performance viz a viz the pin action in the long bonds and gold. On the other
hand, those two huge gap up opens suggest future weakness which would bring it more
in line with the rest of the indicators.
Friday in the charts.
https://www.zerohedge.com/markets/tech-wrecks-fedspeak-fks-fomo-followers-gold-hits-new-record-high
Fundamental
Headlines
The Economy
Week
in review
Last week’s stats were slightly weighted to the
negative side with one primary indicator positive, one neutral and three
negative. Despite the headline narrative that the economy is gaining strength,
the numbers just aren’t there. On the other hand, there is nothing in the
overall data to indicate a recession.
I noted last week that I was starting to believe
that we may be returning to the pre-covid ‘muddle through’ economy. The more I think
about it, the more sense that makes, especially given that the main tenant that
of forecast (i.e., too much government debt usurping private capital/resources)
is even worse today. As a result, I am a short hair away from revising my outlook
from recession to ‘muddle through.’
The inflation data continues to make for unhappy
investor reading. The result being that I changed my forecast to one in which
inflation is and will likely remain a problem. And that fits well with the
above notion of excessive government spending/debt. Adding that to a
historically dovish Fed (its current hawkish noises, notwithstanding) and the
recent performance of commodities (gold, oil) and bitcoin leads me to the
conclusion that inflation may be as good (low) as it is going to get.
Those hawkish Fed noises.
But my favorite optimist still believes inflation
is declining.
https://scottgrannis.blogspot.com/2024/04/belated-march-cpi-analysis.html
Bottom line:
(1)
as long as the government pursues its current
spend, spend policy, I don’t see us making any further progress in lowering the
inflation rate. Indeed, the Fed’s hawkish rhetoric aside, I don’t think it has
any choice but to continue monetizing the government IOUs.
(2) 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
The Chicago national activity index came in at .15
versus estimates of .09.
International
Other
Fiscal Policy
Five
fiscal truths (must read).
https://www.cato.org/blog/five-fiscal-truths
Ruling
class suckers.
Debt
to GDP ratios around the world.
https://www.zerohedge.com/economics/how-debt-gdp-ratios-have-changed-around-world-2000
Recession
Update on big four recession indicators.
Commercial real estate foreclosures soar.
War in the Middle East
While most pundits are rejoicing over Israel’s
rather contained response to Iran’s missile attacks on the Jewish homeland in
the hopes that a serious war has been avoided, Mohamed El Erian is not so sure.
https://www.ft.com/content/53f64b6b-3151-46b3-ad83-3a4732c35d41
Bottom line.
The latest from BofA. (must read)
How well does a ‘buy and hold’ strategy work?
https://www.hunterlewisllc.com/insights/how-bad-could-it-get
The indispensability
of risk.
https://www.advisorperspectives.com/commentaries/2024/04/19/indispensability-of-risk-howard-marks
News on Stocks in Our Portfolios
What I am reading today
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