The Morning Call---Conditions in the banking system suggest no recession

 

The Morning Call

 

8/8/24

 

The Market

         

    Technical

 

            Wednesday in the charts.

            https://www.zerohedge.com/markets/stocks-puke-back-overnight-dovish-boj-gains-bond-yields-black-gold-rise

 

Note: the S&P tried to challenge its 100 DMA but failed, leaving it with a third lower high and initially forming a very short term downtrend. That suggests a test of at least (1) the S&P’s 23.6% Fibonacci retracement level [5157] with the possibility of (2) the 200 DMA [~5020], (3) the 38.25% Fibonacci retracement level [4838] and (4) the lower boundary of its short term uptrend [~4647] to follow.

 

            The VIX indicates that it is time to buy.

            https://investorplace.com/hypergrowthinvesting/2024/08/despite-recession-panic-the-vix-indicates-its-time-to-buy/

 

            Marty Zweig’s trading rules.

            https://mrzepczynski.blogspot.com/2024/08/marty-zweigs-rules-still-useful.html

 

This is a good analysis of the impact of algos on short term market behavior. Although I think in this instance, the author underestimates the impact of the carry trade math on the recent selloff. To be clear, that algos undoubtedly exacerbated the decline.

https://edgyoptimist.substack.com/p/sound-and-fury-cabbages-and-kings?utm_source=post-email-title&publication_id=2450694&post_id=147408919&utm_campaign=email-post-title&isFreemail=true&r=67wdy&triedRedirect=true&utm_medium=email

                       

Here is a better explanation, in my opinion, of the sell off. (surprisingly from the NY Times)

https://www.nytimes.com/2024/08/07/business/stock-market-drama-explained.html

 

    Fundamental

 

       Headlines

 

              The Economy

 

                        US

 

                          Weekly initial jobless claims totaled 233,000 versus estimates of 240,000.

 

                        International

 

                        Other

 

            Monetary Policy

 

              Goldman pours could water on ‘emergency rate cuts’ hope (must read).

              https://www.zerohedge.com/markets/goldman-pours-cold-water-emergency-rate-cut-hope-narrative

 

            Fiscal Policy

 

              Kamala Harris on social security.

              https://www.usatoday.com/story/money/2024/08/04/kamala-harris-on-social-security-10-things-you-need-to-know/74577592007/

 

              Both democrats and republicans got us into this economic mess.

              https://www.washingtonexaminer.com/opinion/3111254/both-democrats-republicans-got-us-into-this-economic-mess/

 

            Inflation

 

              The affordability of new US home as of June 2024.

              https://politicalcalculations.blogspot.com/2024/08/the-affordability-of-new-homes-in-us.html

 

            Recession

 

              Conditions in the banking system suggest no recession.

              https://alhambrapartners.com/market-morsel-sloosing/

 

              Consumers appear to be becoming more cautious in their spending.

              https://www.nytimes.com/2024/08/07/business/economy/recession-consumer-spending.html

 

              Part two.

              https://www.ft.com/content/18563f75-e05d-489e-a0f0-639d4babac11

 

              But not because of a deterioration of the household balance sheet.

              https://wolfstreet.com/2024/08/06/household-debt-delinquencies-collections-and-bankruptcies-our-drunken-sailors-and-their-debts-in-q2/

 

    Bottom line.

 

A ‘MacBeth’ market. In my opinion, this is a close approximation of what is going on in the Market. Theories about the cause of the recent volatility abound. But the most likely reason is not impending disaster but rather the fact that large parts of the Marekt were overvalued and the impact of an exogenous event (BOJ raising interest rates) created an ‘emperor’s new clothes’ moment for investors.

            https://sherwood.news/markets/its-a-macbeth-market-full-of-sound-and-fury-signifying-nothing/

 

            From Goldman’s top trader (must read)

            https://www.zerohedge.com/markets/keep-reins-tight-big-directional-bets-these-are-3-biggest-questions-goldmans-top-traders

 

            I thought gold was a ‘safe haven.’

            https://www.zerohedge.com/political/i-thought-gold-was-safe-haven-why-did-it-tank-stocks

 

    News on Stocks in Our Portfolios

 

Automatic Data Processing (NASDAQ:ADP) declares $1.40/share quarterly dividend, in line with previous.

 

General Dynamics (NYSE:GD) declares $1.42/share quarterly dividend, in line with previous.

UPS (NYSE:UPS) declares $1.63/share quarterly dividend, in line with previous.

 

What I am reading today

 

           

 

 

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