9/16/24
The Market
Technical
The S&P rebounded last week, bouncing off its
100 DMA, negating the potential reset of its 50 DMA and once again approaching
its all-time high. So we are back to the good news (soft landing) scenario. The
recent schizophrenia in the Market is not unusual for this time of year. And it
has only been made worse by the erratic news flow (surprise performance in the
debate/higher inflation numbers than expected). There is still lots more
potentially news altering events ahead of us. So, I remain cautious.
Positive investor sentiment on an
historically long positive streak.
The most difficult part of September’s historically
negative performance is still ahead.
https://www.zerohedge.com/the-market-ear/why-so-serious-4
Three key volatility charts.
https://www.zerohedge.com/the-market-ear/3-key-volatility-charts-we-are-watching
While TLT ended below its high for the week, it
nonetheless trended higher as investors zeroed in on the FOMC meeting this week
and the high likelihood of a Fed rate cut. It remained (1) above all three DMAs
and (2) in a very short term uptrend. In addition, bond investors seem happy
whether we get a 25 or 50 basis point rate cut. So, momentum should stay to the
upside. That said, the current move up seems to be getting a little long in the
tooth, technically speaking. So, some backing and filling would make sense.
The Thursday/Friday pin action in gold was a pretty
good indication that investors are happy, at least for the moment, with the
Fed’s potential rate cut this week, whatever the magnitude. Of course, given
the recent volatility, that judgment could turn on a dime.
The dollar continued in a very short term downtrend.
Given the recent positive investor action in the bond market, there is no
reason to assume that downtrend won’t continue. And as I noted previously, if
it reaches the level suggested by that head and shoulders formation, it would
retreat to the December 28 low.
Friday in the charts.
https://www.zerohedge.com/markets/jensen-jerome-jobs-spark-surge-stocks-gold-crypto-week
Why technical analysis might work.
https://klementoninvesting.substack.com/p/what-we-see-when-we-look-at-price
Fundamental
Headlines
The Economy
Week
of review
Last week’s economic stats were sparse and slightly
downbeat with the primary indicators all negative (zero plus, zero neutral, two
minus). (Overseas data was overwhelmingly negative.) The US numbers support my ‘muddle through’
scenario---with hotter than anticipated core CPI and PPI suggesting an even
more robust economy.
The likely conclusions one might draw from this
data is that the inflation stats (1) may suggest a 25 versus a 50 basis point
cut in the Fed Funds rate coming out of this week’s FOMC meeting---a rate cut
being almost assuredly in the cards, and (2) lessen the strength of the
argument that the Fed is too late in lowering rates and a recession is the
likely result. They also mildly support
my ‘inflation is as good as it is going to get’ forecast.
The case for a 50 bp cut.
https://sherwood.news/markets/fed-september-interest-rate-cuts-25-vs-50-basis-point-debate/
And another.
That said unless and until somebody in
Washington realizes the inflationary implications of the current horrendously irresponsible
fiscal policy, I believe that either the Fed will have to finance that
policy---meaning that higher inflation is an inevitability---or it
won’t---meaning the federal government will suck capital out of the private
sector, stagnating economic growth.
My forecast remains:
(1) the economy
‘muddles through’ and (2) inflation has likely seen its lows. But my confidence
in the latter outcome is low and sinking.
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.
US
The September NY Fed manufacturing index came in at
11.5 versus consensus of -3.9.
International
The July EU trade balance was E21.2 billion versus
projections of E14.9 billion.
Other
Latest Q3 nowcast.
https://www.capitalspectator.com/us-q3-gdp-data-still-expected-to-post-solid-growth/
Inflation
A
possible outcome from Yellen trying to muscle Powell on monetary policy.
https://econbrowser.com/archives/2024/09/scary-movie-pseudo-economics-edition
Civil Strife
The
left’s assault on the Constitution.
The
second assassination attempt.
China
China
is risking a deflationary spiral.
https://www.wsj.com/economy/china-is-risking-a-deflationary-spiral-75702b5b?mod=economy_lead_pos1
Bottom line
Current Market risks.
Market Risks We Are Watching As Correction
Continues - RIA (realinvestmentadvice.com)
The latest must read from BofA.
https://www.zerohedge.com/markets/hartnett-best-hedge-against-inflation-reacclerating-2025
News on Stocks in Our Portfolios
What I am reading today
How
fat are you and what does that say about your health?
https://politicalcalculations.blogspot.com/2024/09/what-does-your-body-roundness-index-say.html
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