11/18/24
The Market
Technical
The S&P took back those explosive gains of the prior
week, closing below the uptrend off its August low. As you can see, the pin
action since the end of October has been highly erratic, including three gap
up/down opens. Short term, the index seems to be working off an overbought
condition in which it will likely close that huge gap up open following election
day and may test its 50 DMA. It has further support lower down at its 100 DMA
(~5638) and the lower boundary of its very short term uptrend (~5566). So, it
could drop another 300 points and not do any real technical damage.
However, it does have a couple of positive things
going for it: (1) seasonally, it a positive time of the year, (2) with Trump’s appointments,
the long term economic outlook is improving [deregulation and lower spending],
(3) there has been little post-election disturbances, (4) the old reliable gap
down open on Friday represents some upward magnetic pull. So, my conclusion
from last week remains ‘the downside risk to stock prices has been truncated.’
That said, it is early to be getting too jiggy with
a possible improving economic outlook. So, patience is still in order.
Hedge funds again shorting stocks.
https://www.zerohedge.com/markets/hedge-funds-are-again-aggressively-shorting-stocks-goldman-prime
The long bond (1) successfully re-tested and
negated the lower boundary of its very short term trading range and (2)
remained below all three DMA’s. That is not what I would have expected given
the aforementioned political news. Although bond investors may be more focused on
Trump’s tariff threats than the newly appointed department of government
efficiency. That said, the next support level is the lower boundary of its
intermediate term downtrend. Let’s see how it handles that.
GLD experienced another steep drop last week which included
another big gap down open. In the process, it reset (1) its very short term
trend from up to a trading range and (2) its 50 DMA from support to resistance,
meaning it has now gone from a hiccup to a stomachache. Clearly, the ‘gold up,
interest rates up, dollar up’ scenario is breaking down with gold being the odd
man out---which makes sense: rates up and the dollar up usually means lower
gold prices.
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.’
It appears that the former is the more likely of
the two. As I noted above, the initial news (cutting spending) out of the new
administration is a pleasant surprise, made more so given the horrendous shape
of the country’s fiscal position. As a result, UUP has reset its short term
trend from down to a trading range and appears ready to challenge the new upper
boundary of that range. Were that to happen it would not only reset the short
term trading to up but would confirm an intermediate term uptrend and
completely reverse the downward moment that has existed since October 2022.
Bottom
line. While the seasonal factor will likely
determine Market direction (up) in the short term, as yet to be announced Trump
policies will be the critical element in deciding the longer term equity
performance. Hence, if you want to trade
the Market move through year end, go for it but I believe that it is too soon
to go all in.
Friday in the charts.
Fundamental
Headlines
The Economy
Week
of review
Last week’s US economic stats were upbeat though
the primary indicators all came in neutral (zero plus, four neutral, zero minus)---in
line with my ‘muddle through’ scenario.
https://bonddad.blogspot.com/2024/11/real-retail-sales-jump-nicely-but-were.html
Among those neutral readings were both CPI and PPI;
so nothing to support ‘inflation has seen its lows’ prediction. However, the
trend remains grim:
My forecast remains: (1) the economy ‘muddles
through’ and (2) inflation has likely seen its lows.
Still, the big news remains on the political front
with Trump appointments/nominations for a bevy of posts---all of which suggest
deregulation and cost cutting (!!!!!), the latter of
which addresses one of my primary concerns about the economy: the out of
control irresponsible profligate budget spending. If it really occurs (remember
every budget item has its supporters in congress; so assume pushback), my long
term outlook for our economy improves significantly (increased productivity,
lower government usurpation of existing resources) though initially growth
could be subpar---unemployment will rise and certain segments of production
will decline.
"Trump Trade" Sends Investors Into
Overdrive - RIA
That is the good news. And it adds to my relief
that the transition of power is occurring without disruption. The bad news
remains Trump’s across the board tariff proposals, the negatives of which I
have thoroughly documented in these pages (inflation and misallocation of
resources).
Of course, this all just speculation at this point.
We really won’t know the policies and their implications until next year. The
bottom line though is that I am more positive on the economic outlook than I
have been even though at this point I have no way to quantify it.
https://disciplinefunds.com/2024/11/13/could-trump-be-deflationary/
US
International
The September EU trade balance was E12.6 billion
versus consensus of E7.9 billion.
Other
Mid November business cycle indicators.
https://econbrowser.com/archives/2024/11/business-cycle-indicators-mid-november-4
The US banking industry’s hottest new trade (and one
that will ultimately be abused).
Monetary Policy
Powell’s
latest pirouette.
MARKET CALL: Powell's Latest Pirouette
Bottom line
The latest from BofA.
https://www.zerohedge.com/markets/hartnett-trump-20-unleashed-us-tina-and-how-it-ends
Too late to jump on the Trump trade?
https://www.zerohedge.com/markets/it-too-late-jump-trump-trade
What Trump means to crypto.
The argument for lower
rates.
Paul Tudor Jones: I Won't Own Fixed Income - RIA
Goldman’s 2025
outlook.
https://www.zerohedge.com/markets/goldmans-complete-2025-forecast-markets-macro-and-everything-else
News on Stocks in Our Portfolios
FedEx (NYSE:FDX) declares $1.38/share
quarterly dividend, in line with
previous.
What I am reading today
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