7/1/24
The Market
Technical
The S&P was down for the week, capped by a high
volume selloff on Friday. I am not sure that there is much significance to
this, given that (1) it remains above all DMA’s and in uptrends across all time
frames and (2) there is little visible resistance save the upper boundaries of
its intermediate term uptrend (~6800) and long term uptrend (~7100). The only
negative is that the three weeks old gap up open still needs to be filled. But
even when that occurs there will be almost no technical damage done to this
chart. All that said, there is mounting concern among technicians about the
lack of volatility and breadth; and I am developing a case of altitude
sickness.
A sneak peek into second half seasonality for
stocks.
https://www.lpl.com/research/blog/sneak-peek-into-second-half-seasonality-for-stocks.html
Not so calm beneath the surface (must read).
https://www.nytimes.com/2024/06/28/business/stocks-dispersion-trade.html
The last legs of a melt up.
Hedging is cheap.
https://www.zerohedge.com/the-market-ear/rejection-and-cheap-hedging
Technicals are set to worsen from here.
https://www.zerohedge.com/markets/goldman-trader-technicals-are-set-worsen-here
Hedge funds are selling/shorting are the
highest rate in two years.
https://www.zerohedge.com/markets/hedge-funds-are-selling-and-shorting-stocks-fastest-pace-two-years
The long bond had a rough week topped off by a
horrible Friday, closing below both its 100 and 200 DMAs though neither have
reset to resistance. Of short term importance, that huge gap up open from three
weeks ago has been closed. Plus, the seeming consensus that inflation/the
economy is slowing suggest that this sell off is short term in nature. On the
other hand, it remains within downtrends across all timeframes. For moment,
color me confused.
GLD had another volatile week. The good news is
that it didn’t make a new lower low. The bad news is it continues to develop a well-defined
head and shoulders pattern. The outstanding question remains will it bust
through the next visible support level (the horizontal red line). I retain my
GDX position but as I noted last week, will sell it if that red line is
breached.
The dollar continued its upward march. It is above all
DMAs; that is good. However, it is approaching the upper boundary of its short
term downtrend (brown line). A break above that boundary would not be a good
sign for stocks.
Friday in the charts.
Fundamental
Headlines
The Economy
Week
in review
Last week’s stats were a little sparse. The
indicators were balanced including the primaries (one plus, one minus). Overseas,
the data had a modest negative bias. This is certainly a change from the hugely
negative reads of the prior two weeks. So, I retain with doubtful conviction my
forecast though, for the moment, it remains unchanged:
(1) the economy muddles through and (2)
inflation has likely seen its lows. But clearly my confidence in that outcome
is weakened.
While not quite enough to warrant altering my
forecast, another couple of weeks of discouraging numbers will. In short, (1)
my original recession call may turn out to be correct and (2) while I continue
to believe that profligate fiscal policy and an accommodative Fed will
ultimately lead to higher inflation, a recession could work against that
scenario in the near term. And I would add that if (1) recession is the
ultimate scenario and (2) the Fed maintains its tight money policy, then
conditions could develop even worse.
US
International
The June Japanese consumer confidence index was
36.4 versus forecasts of 36.5.
The June German manufacturing PMI was 43.5 versus projections
of 43.4; the June EU manufacturing PMI was 45.8 versus 45.6; the June UK
manufacturing PMI was 50.9 versus 51.4.
June German preliminary CPI was +0.1% versus
estimates of +0.2%.
Other
Monetary Policy
Monetary policy is returning to normal (from my favorite
optimist. While he recognizes the problem posed by irresponsible fiscal policy,
he fails to mention that historically, the Fed monetizes deficits which, in
turn, aggravates inflation).
https://scottgrannis.blogspot.com/2024/06/monetary-conditions-are-returning-to.html
Fiscal Policy
The case for adult management of our economy (the
tone of this piece is a bit too strident for me; but it makes the point.)
Recession
Update
on big four recession indicators.
https://www.advisorperspectives.com/dshort/updates/2024/06/28/the-big-four-recession-indicators
The
latest Q2 nowcast.
https://www.calculatedriskblog.com/2024/06/q2-gdp-tracking-17-to-22.html
Household net
worth near record highs.
Moody’s
predicts that 24% of office tower space will be empty by 2026.
https://www.zerohedge.com/markets/moodys-predicts-office-towers-will-be-vacant-2026
Tariffs
Tariffs
undermine tax cuts.
https://www.cato.org/blog/trumps-tariffs-undermine-tax-cuts
War in the Middle East
War
cycle turns up.
The Supreme Court
Curbing the power of federal agencies.
Giving
the streets back.
https://www.zerohedge.com/economics/major-blow-democrats-supreme-court-enacts-crackdown-homeless
Bottom line.
The confidence dichotomy.
The Confidence Dichotomy - RIA
(realinvestmentadvice.com)
When credit loses its power to stimulate
growth (must read).
https://www.advisorperspectives.com/commentaries/2024/06/28/redux-credit-supernova
The election and the Fed loom as risks to
stocks in the second half.
Q1 breakdown of corporate profits.
News on Stocks in Our Portfolios
What I am reading today
The secret to sanity and success.
https://ryanholiday.net/this-is-the-secret-to-sanity-and-success/
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