Monday, September 16, 2024

Monday Morning Chartology

 

 

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.

            https://www.bespokepremium.com/interactive/posts/think-big-blog/sentiment-goes-according-to-seasonality

 

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.

https://wolfstreet.com/2024/09/12/services-ppi-bounces-back-in-august-from-july-rises-year-over-year-core-goods-ppi-jumps/

 

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.

https://www.bloomberg.com/opinion/articles/2024-09-13/the-fed-has-no-choice-but-to-assume-the-worst?srnd=homepage-americas&sref=loFkkPMQ

 

 

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.

              https://www.wsj.com/opinion/the-lefts-assault-on-the-constitution-pack-the-court-attack-free-speech-kamala-harris-47a78eda?mod=opinion_lead_pos5

 

              The second assassination attempt.

              https://www.zerohedge.com/geopolitical/carolina-roofer-ukraine-activist-would-be-trump-assassin-ryan-routh-gave-many

 

            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

 

Visit Investing for Survival’s website (http://investingforsurvival.com/home) to learn more about our Investment Strategy, Prices Disciplines and Subscriber Service.

 

 

 

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