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.
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.
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.
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.
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?
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.
Bottom
line.
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News
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What I am reading today
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