The Morning Call---What the confusing Markets seem to be discounting

 

The Morning Call

 

10/31/24

 

The Market

         

    Technical

 

            Wednesday in the charts.

            https://www.zerohedge.com/market-recaps/gold-hits-another-record-high-goldilocks-data

 

            Three bull trap charts.

            https://www.zerohedge.com/the-market-ear/3-bull-trap-charts-we-are-watching

 

            Seasonality says melt up.

            https://www.zerohedge.com/the-market-ear/seasonality-says-melt

 

            October ’23 to October ’24---one for the history books.

            https://www.zerohedge.com/markets/easy-street-goldman-notes-sp-just-completed-one-its-greatest-risk-adjusted-annual-returns

 

    Fundamental

 

       Headlines

 

              The Economy

 

                        US

 

Weekly initial jobless claims totaled 216,000 versus predictions of 230,000.

                         

                          September pending home sales rose 7.4% versus estimates of +1.1%.

                          https://www.calculatedriskblog.com/2024/10/nar-pending-home-sales-increase-74-in.html

 

September personal income was up 0.3%, in line; September personal spending was up 0.5% versus +0.4%.

 

The September PCE price indicator was up 0.2%, in line; the September core PCE price indicator was up 0.3%, also in line.

                                  https://www.zerohedge.com/economics/feds-favorite-inflation-indicator-hotter-expected-september

 

                        International

 

September Japanese preliminary industrial production was up 1.4% versus projections of 1.0%; September retail sales fell 2.8% versus -5.0%; September YoY housing starts were down 0.6% versus -4.1%; September YoY construction spending was down 21.3% versus +10.0%.

 

September German retail sales grew 1.2% versus forecasts of -0.5%;   October German CPI was up 0.4% versus up 0.2%.

 

The September EU unemployment rate was 6.3% versus expectations of 6.4%; the October flash CPI was +0.3% versus +0.1%.

 

The October Chinese manufacturing PMI was 50.1 versus consensus of 50.0; the October nonmanufacturing PMI was 50.2 versus 50.4; the October composite PMI was 50.8 versus 50.6.

 

                        Other

 

                          A deep dive into the employment numbers.

                          https://wolfstreet.com/2024/10/29/hiring-jumps-for-3rd-month-workers-cling-to-jobs-layoffs-discharges-jump-but-remain-low-job-openings-fall/

 

            Fiscal Policy

 

              The UK’s new budget wet dream.

              https://www.zerohedge.com/markets/uk-gilt-yields-soar-after-reeves-reveals-budget-market-braces-inflationary-debt-surge

 

            Recession

 

              Eurozone expands faster than expected.

              https://www.wsj.com/world/europe/france-economy-picks-up-pace-as-olympics-spurs-growth-a093f7b6?mod=economy_lead_story

 

            Tariffs

 

              A review of the post-Civil War tariff regime.

              https://cafehayek.com/2024/10/more-on-tariffs-and-19th-century-american-industrialization.html

 

    Bottom line

 

            What the Markets seem to be discounting.

            https://www.zerohedge.com/markets/it-beginning-look-debt-emergency

 

            Goldman hikes gold price forecast.

            https://www.zerohedge.com/precious-metals/goldman-hikes-its-gold-price-forecast-five-fold-increase-central-bank-demand

 

            Gold rises on ‘fear of missing out’.

            https://www.ft.com/content/dd0e24a4-b694-40ca-881e-d9423f2a8541

 

            Credit spreads are narrow. What does that mean?

            https://entrylevel.topdowncharts.com/p/chart-of-the-week-credit-spreads

 

            On the other hand, long rates are rising on fears of fiscal sustainability.

            https://www.apolloacademy.com/us-fiscal-outlook-starting-to-play-a-role-for-long-term-interest-rates/

 

            Or are they?

            https://sherwood.news/markets/bond-market-interest-rates-donald-trump-potential-impacts/?

 

    News on Stocks in Our Portfolios

 

• Altria press release (NYSE:MO): Q3 Non-GAAP EPS of $1.38 beats by $0.03.
• Revenue of $5.34B (+1.1% Y/Y) beats by $10M.

 

• C.H. Robinson Worldwide press release (NASDAQ:CHRW): Q3 Non-GAAP EPS of $1.28 beats by $0.13.
• Revenue of $4.64B (+6.9% Y/Y) beats by $100M.

 

 

What I am reading today

 

           

                        The first sack of Rome.

            The first sack of Rome wasn't when you think it was

 

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The Morning Call---Is the prospect for another rate cut fading?

 

The Morning Call

 

10/30/24

 

The Market

         

    Technical

 

            Tuesday in the charts.

            https://www.zerohedge.com/market-recaps/trump-trade-goes-turbo-bitcoin-bullion-hit-record-highs-tech-tsy-yields-rise

 

            Key market indicators for November.

            Key Market Indicators for November 2024 - RIA

 

            Earnings reports are increasing price volatility.

            https://www.ft.com/content/f87e5d13-0801-4951-b69e-8b8648a099ce

 

    Fundamental

 

       Headlines

 

              The Economy

 

                        US

 

Weekly mortgage applications fell 0.1% while purchase applications rose 5.0%.

 

Month to date retail chain store sales grew more rapidly than in the prior week.

 

The August Case Shiller home price index fell 0.3% versus forecasts of -0.1%.

https://www.calculatedriskblog.com/2024/10/case-shiller-national-house-price-index_29.html

 

 September job openings (JOLTS) totaled 7.4 million versus predictions of 7.9 million.

https://www.calculatedriskblog.com/2024/10/bls-job-openings-little-unchanged-at-74.html

 

Q3 advanced GDP growth was 2.8% versus consensus of 3.0%; the Q3 advanced PCE price index was 1.8% versus 2.7%; the Q3 advanced core PCE was 2.2% versus 2.1%; Q3 advanced real consumer spending was 3.7% versus 3.0%.

https://www.zerohedge.com/economics/us-q3-gdp-growth-disappoints

 

October ADP private payrolls grew 233,000 versus expectations of 115,000.

https://www.zerohedge.com/personal-finance/october-surprise-adp-employment-report-signals-six-sigma-beat-week-elections

 

The October consumer confidence index was reported at 108.7 versus estimates of 99.5.

                          https://econbrowser.com/archives/2024/10/confidence-surprises-on-the-upside

 

                        International

 

Q3 EU flash GDP growth was +0.4% versus projections of +0.2%; the October economic sentiment index came in at 95.6 versus 96.3; the October industrial sentiment index was -13.0 versus -10.5; the October services sentiment index was 7.1 versus 6.6; the October consumer confidence index was -12.5, in line.

 

Q3 German flash GDP increased 0.2% versus forecasts of -0.1%; the October unemployment rate was 6.1%, in line.

 

The October Japanese consumer confidence index was 36.2 versus predictions of 37.0.

 

                        Other

 

            Monetary Policy

 

              Is the prospect for another rate cut fading?

              https://www.capitalspectator.com/is-the-prospect-for-another-fed-rate-cut-fading/

 

            Tariffs

 

              Trump’s tariffs would rock global trade.

              https://www.nytimes.com/2024/10/28/us/politics/trumps-tariffs-global-trade.html

 

            The Election

 

              Four history lessons on how the market will react in this election.

              https://www.zerohedge.com/markets/4-history-lessons-how-market-will-react-election

 

    Bottom line.

 

            Rose colored glasses?

            https://alhambrapartners.com/weekly-market-pulse-rose-colored-glasses/?src=news

 

            Keep politics out of your portfolio.

            https://klementoninvesting.substack.com/p/the-growing-partisan-divide-in-us

 

            In praise of master limited partnerships.

            https://www.advisorperspectives.com/commentaries/2024/10/29/stop-me

 

            Weird things are happening in the bond market.

            https://www.bloomberg.com/opinion/articles/2024-10-29/weird-things-are-happening-in-the-bond-market?srnd=homepage-americas

 

    News on Stocks in Our Portfolios

 

AbbVie (NYSE:ABBV) declares $1.64/share quarterly dividend, 5.8% increase from prior dividend of $1.55.

 

Illinois Tool Works Inc. press release (NYSE:ITW): Q3 Non-GAAP EPS of $2.65 beats by $0.12.

Revenue of $4B (-1 Y/Y) misses by $20M.

 

Automatic Data Processing press release (NASDAQ:ADP): Q1 Non-GAAP EPS of $2.33 beats by $0.12.

Revenue of $4.8B (+6.7% Y/Y) beats by $30M.

 

What I am reading today

 

            The golden boy of ancient Rome.

            Who killed Germanicus, the golden boy of ancient Rome?

 

            Big lies and little progress---another ruling class f**kup. I note that this article

comes from a liberal website.

https://www.nakedcapitalism.com/2024/10/big-lies-and-little-progress-biden-national-security-advisor-jake-sullivans-foreign-policy-for-the-middle-class.html

 

 

 

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The Morning Call---The economic data over the next couple of weeks will be a mess

 

The Morning Call

 

10/29/24

 

 

The Market

         

    Technical

 

            Monday in the charts.

            https://www.zerohedge.com/market-recaps/squeezy-moves-stocks-bitcoin-bid-ahead-catalyst-heavy-week

 

                The start of the best trading period of the year.

            https://www.zerohedge.com/the-market-ear/crashy-oil-smooth-gold-and-immune-equities

 

            Late to the rates and dollar party.

            https://www.zerohedge.com/the-market-ear/late-rates-and-dollar-party

 

            The latest investor sentiment reading.

            https://www.bespokepremium.com/interactive/posts/think-big-blog/half-a-year-of-bulls

 

    Fundamental

 

       Headlines

 

              The Economy

 

                        US

 

The October Dallas Fed manufacturing index came in at -3 versus estimates of -1.

 

                        International

 

The September Japanese unemployment rate was 2.4% versus projections of 2.5%.

 

The October German consumer confidence index was -18.3 versus consensus of -20.5.

 

                        Other

 

                          The economic data over the next couple of weeks will be a mess.

                          https://www.wsj.com/economy/jobs/at-a-pivotal-moment-u-s-economic-data-will-be-a-mess-9224ad9f?mod=economy_lead_story

 

            Tariffs

 

              Trump 2.0 tariffs.

              https://econbrowser.com/archives/2024/10/trump-2-0-tariffs-and-wisconsin

 

            The Election

 

              Vote in the booth not your portfolio.

              https://www.advisorperspectives.com/commentaries/2024/10/28/what-will-election-mean-markets

 

              Economists warn of new inflation hazards after the election.

              https://www.wsj.com/economy/trump-harris-election-inflation-0797554a?mod=economy_lead_pos2

 

    Bottom line

 

            The Treasury yield curve responds to higher inflation fears.

            https://wolfstreet.com/2024/10/26/treasury-yield-curve-un-inversion-hits-milestone-on-inflation-fears-tsunami-of-supply-and-qt-mortgage-rates-near-7/

 

            A billion here, a billion there….

            Modern Monetary Magic At Work

 

            Thus far, Q3 earnings beats have disappointed.

https://www.bloomberg.com/news/articles/2024-10-28/s-p-500-profit-beats-disappoint-as-season-kicks-into-high-gear?srnd=homepage-americas&embedded-checkout=true

 

 

    News on Stocks in Our Portfolios

 

What I am reading today

 

           

 

 

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Monday Morning Chartology

 

The Morning Call

 

10/28/24

 

The Market

         

    Technical

 

The S&P just keeps on rollin’ along. (true, it was down slightly on the week, but…..) It is in uptrends across all timeframes and above all DMA’s. While some technicians are warning of an October decline, (it better hurry because October is almost over) my assumption is that stocks will sustain their upward momentum at least through year end. That said, the US political environment remains unstable, in my opinion; and that keeps me cautious, which for the moment is clearly wrong.

 

A bullish review but with a cautionary note.

https://www.marketwatch.com/story/why-stocks-are-getting-that-same-look-they-had-just-before-the-2022-bear-market-3648f9fe?mod=opinion

 

Missing the bull.

https://www.zerohedge.com/the-market-ear/missing-bull-forced-buying-may-be-next

 

How sustainable is this rally?

Streaks Of Bullish Wins Are Not Sustainable - RIA

 

 

Hedge funds are shorting stocks again.

https://www.zerohedge.com/markets/after-two-weeks-buying-hedge-funds-are-again-shorting-stocks

 

 

 

 

 

The long bond continued its losing ways---which started with a big gap down open on Monday and ended resetting both its 100 and 200 DMAs to resistance. It is about to test the lower boundary of a very short term trading range which is pretty weak support. If it can’t hold that level, then the next stop is the lower boundary of its intermediate term downtrend.

 

 

 

 

 

GLD maintained its upward bias. I noted over the last three weeks that I found it surprising that ‘the price action could remain this calm (positive) during a week in which TLT plummeted in price and the dollar soared. Indeed, barring some catastrophic economic/political/ military event, I don’t see how it can maintain its upward bias as long as both interest rates and the dollar are in Titan III formations.’  That hasn’t changed.

 

 

 

 

 

 

My thoughts on the dollar are unchanged:

 

Despite a minor selloff on Thursday, the dollar continues to shoot the moon---not suggesting but shouting that investors think that either something enormously positive is occurring or about to occur in the US or that something enormously negative is occurring or about to occur internationally. We can all speculate on what those may be but if they don’t happen it seems likely that some retracement is to be expected.

 

 

 

Note: as you can tell from my comments, I find the entire technical picture very confusing. History informs us that the only way both gold and interest rates can rise for any extended period of time is if investors believe that inflation will render the real interest rates negative; and when real interest rates are negative, the dollar doesn’t do well. The pundits are telling us that the whole of this pin action is reflecting a Trump victory. To be sure, given the already disastrous fiscal position that the US is now in, lower taxes will almost certainly force the Fed to monetize an ever growing deficit (i.e., higher inflation). But higher inflation usually means a lower dollar. Also, higher tariffs would likely lead to slower economic growth. That, again, suggests a lower dollar---unless the US still grows faster than the rest of the world and/or its inflation rate is less.

 

You see the problem here---it is tough to come up with a scenario in which gold, interest rates and the dollar are all up. Not that it won’t happen. But the bottom line is this particular circumstance, in my opinion, warrants caution on all fronts.

 

            Friday in the charts.

            https://www.zerohedge.com/market-recaps/stocks-break-six-week-win-streak-gold-hits-record-high-trump-trade-takes

 

    Fundamental

 

       Headlines

 

              The Economy

 

                        Week of review

 

The economic stats last week were positive as were the primary indicators  (two plus, one neutral, no minus). That pretty much fits my ‘muddle through’ scenario.

 

There was no US inflation numbers but overseas (which in total was upbeat) the price data was good. I will count that as a modest positive though it is clearly at odds with my forecast.

 

…. 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.

                                               

                        US

 

 

                        International

 

                        Other

 

                          Forty years of American consumer spending.

                          https://politicalcalculations.blogspot.com/2024/10/trends-in-american-consumer-spending.html

 

                          Homebuilders pile on incentives.                  

https://wolfstreet.com/2024/10/24/inventory-of-new-spec-houses-spikes-to-highest-since-2009-sales-grow-as-builders-pile-on-incentives-and-trim-prices/

 

                          The latest Q3 nowcast.

                              https://www.calculatedriskblog.com/2024/10/q3-gdp-tracking-just-over-3_25.html

 

            Monetary Policy

 

              If the Fed raises rates, Powell should resign.

              https://www.foxbusiness.com/video/6363551730112

 

              The Fed is not as important as you may think.

              https://www.cato.org/blog/borrowing-rates-are-significantly-less-correlated-feds-policy-rate

 

M2 continues to slow. I mostly agree with this analysis. But what the author leaves out is that if the deficit continues to grow and M2 growth remains stable, government spending will crowd out industrial expansion slowing economic growth to below average secular rate.

https://scottgrannis.blogspot.com/2024/10/slow-m2-means-low-cpi.html

 

                  Navigating the tight money, loose liquidity paradox.

              https://www.advisorperspectives.com/commentaries/2024/10/25/navigating-tight-policy-loose-liquidity

 

                Fiscal Policy

 

              Neither Trump nor Harris want to drain the swamp.

              https://reason.com/2024/10/24/neither-trump-nor-harris-wants-to-drain-the-swamp-they-want-you-to-join-it/

               

                Civil Strife

 

              Let’s hope this doesn’t happen.

              https://www.zerohedge.com/political/quiet-storm

 

                The Election

 

              Who will win and what it means.

              https://www.zerohedge.com/markets/who-will-win-and-what-does-it-mean

 

  What happens in an election sweep?

  Market Call: Sweep Stakes

 

              A Trump victory and stocks will scream higher.

              https://www.zerohedge.com/markets/hedge-fund-cio-trump-victory-and-stocks-will-scream-higher

 

  Be careful until after the election.

   https://www.zerohedge.com/markets/bonds-bullion-breakout-goldman-top-trader-warns-equity-riskreward-will-be-iffy-until-after

 

     Bottom line.

           

            The latest from BofA.

            https://www.zerohedge.com/economics/hartnett-blowback-against-flood-illegal-immigrants-will-spark-next-inflation-surge

 

    News on Stocks in Our Portfolios

 

What I am reading today

 

 

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