Monday, September 9, 2024

Monday Morning Chartology

 

 

9/9/24

 

The Market

         

    Technical

 

The S&P had a bad week capped by a terrible Friday. It pushed through its 50 DMA to the downside (if it remains there through the close of Monday, it will revert to resistance) and then dropped like a stone to near its 100 DMA (~5380). I can only surmise that the stock jockeys have again decided the bond crowd is right, i.e., the accepted scenario in stock land is drifting from a ‘soft landing’ to a ‘softer landing.’  Can a recession forecast be far behind? (my original but later altered forecast). I hate flip flopping, but I may have to.

 

The Friday move (1) closed that gap up open [that’s actually a plus], (2) leaves it within striking distance of its 100 DMA [~5380], (3) with the 23.5% Fibonacci retracement level [~5157 and the former very short term bottom] and the 200 DMA [~5106] lurking below. I remain cautious.

 

            The importance of sentiment.

            https://klementoninvesting.substack.com/p/in-the-end-it-all-boils-down-to-sentiment

 

            The techincals are not looking good.

            https://www.zerohedge.com/the-market-ear/fearful-friday

 

 

 


 

While TLT was off slightly on Friday, it had a good week nonetheless making a new higher high. It also (1) is above all three DMAs and (2) it remains in a very short term uptrend. As long as an approaching ‘softer landing’?/recession scenario gains acceptance, I expect the upward price action to hold. That said, the current upside blast seems to be getting a little long in the tooth, technically speaking. So, some backing and filling would make sense.

 

 


 

 

Bonds up (rates down), the dollar flat---gold by all rights should be up at least a little. But it continues to be unable to get that job done. That keeps me nervous about GLD and glad that I sold my GDX.

 

 


 

The dollar continued in a very short term downtrend, making a new lower high in the process. At the moment, 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/kamala-karnage-market-goes-haywire

           

    Fundamental

 

       Headlines

 

              The Economy

 

                        Week of review

 

Last week’s economic stats were evenly balanced, including the primary indicators (two plus, two minus). (Overseas data was overwhelmingly negative.)  

https://www.wsj.com/economy/global/eurozone-economy-weaker-than-previously-estimated-as-ecb-prepares-to-meet-c5bd97d1?mod=economy_lead_story

 

And,

https://www.wsj.com/economy/trade/german-recession-fears-mount-as-industry-weakens-again-06dfe2c9?mod=economy_lead_pos1

 

The US numbers clearly support my ‘muddle through’ scenario (which the Street is more affectionately referring to as a ‘soft landing’).

 

However, the aforementioned international stats as well as the disappointing narrative in the latest Beige Book keep me vigilant to potential problems. On the other hand, they help the Fed rationalize a declining Fed Funds rate which we will almost certainly see manifest at the September FOMC meeting.

 

The hope, of course, is that a rate cut will help insure the ‘soft landing.’  However, I think (and certainly the bond Market is suggesting) that there remains the risk that the Fed is too late in lowering rates and a recession is the likely result.

 

There was not much in the way of price data though the Beige Book hinted at mild inflationary pressures. Still, I will likely soon revise my original inflation forecast: ‘inflation is as good as it is going to get’---at least in the short term.

 

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.

 

A must read interview with Ken Rogoff.

https://themarket.ch/english/we-will-see-more-spikes-in-inflation-ld.11975

 

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

 

 

                        International

           

                        Other

 

 

                        Monetary Policy

 

              Update on the Fed’s balance sheet.

              https://wolfstreet.com/2024/09/05/fed-balance-sheet-qt-66-billion-in-august-1-85-trillion-from-peak-to-7-11-trillion-back-to-june-2020-another-qt-milestone/

 

                        Fiscal Policy

 

              Social Security faces $63 trillion in unfunded liabilities.

              https://www.zerohedge.com/political/social-security-facing-63-trillion-unfunded-liabilities

 

 

                        Civil Strife

 

              A cure.

https://edgyoptimist.substack.com/p/im-mad-as-hell?utm_sourc=post-email-title&publication_id=2450694&post_id=148512120&utm_campaign=email-post-title&isFreemail=true&r=67wdy&triedRedirect=true&utm_medium=email

 

                        Geopolitics

 

              I am not sure this author has the solution correct, but he nailed the problem.

              https://www.nakedcapitalism.com/2024/09/who-wants-to-kill-and-die-for-the-american-empire.html

 

 

          Bottom line

 

This is the first analyst that I have found willing to state long term bearish Market view.

https://www.ft.com/content/c074dde0-7510-44c0-a178-8ca80254dfb1

 

Except for the ever reliable BofA.

https://www.zerohedge.com/markets/hartnett-economy-has-never-been-more-polarized

           

 

    News on Stocks in Our Portfolios

 

AbbVie (NYSE:ABBV) declared $1.55/share quarterly dividend, in line with previous.

 

What I am reading today

 

            Monday morning humor.

            https://politicalcalculations.blogspot.com/2024/09/inventions-in-everything-urinal-headrest.html

 

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