10/7/24
The Market
Technical
The S&P’s advance paused last week though
Friday’s positive tape managed to recover most of the earlier-in-the-week
losses. The news flow remained upbeat (nonfarm payrolls, China bazooka, part 2,
longshoremen’s strike resolved quickly). While some technicians are warning of
an October decline, my assumption is that stocks will sustain their upward
momentum at least though 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.
The long bond had a very tough week, experiencing
two big gap down opens---to which there is the technical positive that those
gap need to be filled. In addition, TLT is nearing support from its 100 and 200
DMAs as well as the lower boundary of its very short term uptrend. My guess is
that this combination of strong support and the magnetic pull of those gap down
opens will halt the short term decline.
GLD was flat on the week; but given the sustained upward
momentum since last October, that only seems normal. On the other hand, it is
surprising that the price action could remain this calm 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.
As you can see, the dollar had not one, not two,
not three but four gap up opens in succession last week---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.
Friday in the charts.
https://www.zerohedge.com/market-recaps/good-news-sparks-bond-bloodbath-stocks-dip-crude-rips-week
Fundamental
Headlines
The Economy
Week
of review
The economic stats last week were very slightly positive
with the primary indicators negative (one plus, two minus). In a big turnaround,
the overseas data was overwhelmingly positive. The US numbers continue to fit
my ‘muddle through’ scenario---clearly helped by the quick resolution of the
longshoremen’s strike as well as the blowout nonfarm payroll report.
(If you believe it).
The improved international data and the additional
stimulus being applied to the Chinese economy also help.
As you know, I have been thinking that the biggest
risk to my forecast was a weak global economy. So, while a one week improvement
in all sectors is hardly a trend, it may prove to be a first step. Follow
through.
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.
The
most insulting economic narrative.
https://disciplinefunds.com/2024/10/01/the-most-insulting-economic-narrative/
From
my favorite optimist.
https://scottgrannis.blogspot.com/2024/10/looking-pretty-good-m2-gdp-and.html
US
International
August Japanese leading economic indicators came in
at 106.7 versus forecasts of 107.4.
August German factory orders fell 5.8% versus
predictions of down 2.0%.
August EU retail sales were up 0.2%, in line.
Other
Monetary Policy
Update
on the progress of QT.
Recession
Retailers have no room for error this holiday season.
The
yield curves ‘infallible’ recession signal failed (so far) this time.
https://www.capitalspectator.com/the-yield-curves-infallible-recession-signal-failed-this-time/
News on Stocks in Our Portfolios
What I am reading today
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