7/22/24
The Market
Technical
The S&P suffered some serious whackage last
week. But as you know, the damage was mostly in the Mag 7; while the rest of
the Market faired okay---at least the stocks of those companies that are
profitable. That said, (1) the index remains above all DMA’s and in uptrends
across all time frames, (2) there is little visible resistance save the upper
boundaries of its intermediate term uptrend (~6800) and long term uptrend
(~7100), (3) at least for the moment, the universe is embracing multiple rate
cuts through year end and (4) Wednesday had a gap down open, which needs to be
closed. I remain nervous.
What to make of the rotation in last week’s
market.
https://www.ft.com/content/6983ad77-3e16-42c7-86fc-bf011d2e5b1a
Seven rotation charts.
https://www.zerohedge.com/the-market-ear/7-rotation-charts-you-might-have-missed
The Market hits a snag.
Russell
Explodes Higher As Rotation Takes Hold - RIA (realinvestmentadvice.com)
The long bond also had some problems. It failed to
make a new higher high, likely responding to those three gap up opens that need
to be closed. While TLT is above all three DMAs, it also remains within downtrends
across all timeframes. The increasing odds of a Trump victory in November is
likely a driving force of this pin action---investors believe that his policies
will result in higher rates. How this impacts near term Fed policy will
probably become a source of concern for the bond guys. Hence, I would expect
some volatility in long rates until Powell et al provide some clarity.
Investors revive ‘Trump trade’ in bonds.
https://www.ft.com/content/f2e97440-6bdb-449d-8403-030450b60125
GLD was having a pretty good week until Friday. Intra
week, it traded above its all-time high but didn’t stay there long enough to
qualify as a breakout (at least under my time and distance discipline)---giving
the chart the ominous look of a triple top. I retain my GDX position; but
clearly this pattern makes me nervous.
The dollar was up on the week, but that didn’t stop
its pin action from being somewhat confusing. After voiding its very short term
uptrend and resetting its 50 DMA to resistance in the prior week, it pushed
through its 200 DMA (on the downside), touched its 100 DMA, then bounced hard,
closing back above its 200 DMA (negating that challenge) as well as its 50 DMA
(if it remains there though the close today, it reset back to support). As with
TLT and GLD, I am assuming that the prospects for higher long rates was the
driving force.
Friday in the charts.
https://www.zerohedge.com/markets/bitcoin-buck-bounce-big-tech-bonds-black-gold-breakdown
Fundamental
Headlines
The Economy
Week
in review
The stats last week were balanced (four plus, three
neutral, four minus), though the primary indicators were positive (two plus,
two neutral, zero minus). That is right in line with my ‘muddle through’
scenario, but counter to the recent string of disappointing releases. Nonetheless, it gives me cause to leave my
forecast unchanged.
The inflation data we got all came from overseas
and it pointed higher (overall, the global numbers were abysmal). So here again,
the stats were supportive of my current projections (inflation is as good as
it’s going to get).
For the moment, my prognosis remains:
(1) the economy muddles through and (2) inflation
has likely seen its lows. But my confidence in that outcome is low.
However, (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
The June Chicago national activity index came in at
+0.05 versus estimates of -0.09.
International
Other
Monetary
Policy
Has the neutral rate of interest increased?
https://www.capitalspectator.com/has-the-neutral-rate-of-interest-increased/
Geopolitics
What
happens in Ukraine if Trump wins?
https://www.nakedcapitalism.com/2024/07/what-happens-with-the-war-in-ukraine-if-trump-wins.html
Bottom line
Is the Market misreading the Fed again?
https://www.apolloacademy.com/is-the-market-repeating-the-mistake-it-made-in-january/
Can the mega cap stocks continue their domination?
Can
Mega-Capitalization Stocks Continue Their Dominance? - RIA
(realinvestmentadvice.com)
News on Stocks in Our Portfolios
What I am reading today
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