8/19/24
I
am still at the beach and will return on 8/26.
The Market
Technical
The S&P continued its recovery in fairly dramatic
fashion, spurred on by (in my opinion) an overly optimistic interpretation of
last week’s dataflow. It reset both its 50 and 100 DMAs to support and pushed
up through the downtrend off its July 16 high. While it is still short of
making a higher high and has that gap up open down below, I think that the
burden of proof is on the bears to argue that the correction isn’t over. That said,
(1) I question the new revised ‘Goldilocks’ economic assumption, (2) whatever
you may think of the social impact of the new democratic party platform, economically
it is inflationary; and I think that a negative, given the current poll numbers
and (3) valuations in total remain high. I remain cautious. But as I noted in
Wednesday’s note, I do have a Buy List in hand.
Share repurchases end correction, but………...
Share Repurchases End The Market Correction - RIA
(realinvestmentadvice.com)
From the head of Goldman’s hedge fund trading
desk.
The pain trade is
higher.
https://www.zerohedge.com/the-market-ear/pain-trade-higher
The long bond had a volatile week but remains in an
uptrend off its April 25 low. We are probably not done with volatility,
especially if investors keep changing their generally accepted economic
scenario.
GLD looks like it has finally made a breakout above
its former all-time high. My time and distance discipline requires it to stay above
that breakout level until Thursday to confirm the breakout. Plus, there is that
gap up open that must be closed. I retain my GDX position and will likely add
to it this week.
The dollar had another volatile week but continued
to decline. If it reaches the level suggested by that head and shoulders formation,
it could retreat to the December 28 low. Though if the new “Goldilocks’
scenario persists, that seems unlikely.
Friday in the charts.
Fundamental
Headlines
The Economy
Week
in review
Another slow week for data. Overall, it was slightly
negative; but the primary indicators were awful (two neutral, three negative). The
overseas data was similarly downbeat. I know that is at odds with the new ‘Goldilocks’
interpretation by the Street. I am just calling them as I see them. That makes
three weeks of poor stats (interrupted by one nothing burger week).
This is clearly not indicative of a ‘muddle
through’ scenario. I have said repeatedly that it increasingly appeared that my
original call of a recession looked like it would turn out to be the correct
one. My general rule before altering my outlook is a solid four week trend. So,
I will be hanging on to the ‘muddle through’ scenario a bit longer. That said,
investors have clearly decided that the risk of a recession has escalated
deescalated
dramatically.
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, as I have previously noted (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
Other
Bottom
line
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What I am reading today
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