1/6/25
The Market
Technical
So much for the Santa Claus rally. As you can see,
in my absence, the S&P has made several lower highs and has tested its 50
DMA twice to the downside. The good news is that (1) it seems poised to
challenge it back to the upside and (2) it has yet to launch a test of its 100
DMA and the lower boundary of its very short term uptrend. The immediate thing
that I will be watching is that upside challenge of the 50 DMA and whether the next
high is either lower or higher than the previous one. In the meantime, patience.
Three charts worth watching.
https://www.zerohedge.com/the-market-ear/3-rate-charts-we-are-watching
The January effect: truth or myth?
https://www.barrons.com/articles/stock-market-january-effect-43a245c9?st=fB2LCN
Too many bears.
https://www.zerohedge.com/the-market-ear/too-much-fear-too-many-bears
Hedge funds dumping size.
https://www.zerohedge.com/the-market-ear/fast-and-furious-hedge-funds-dump-size-techs-bounce-fuels-frustration
TLT suffered some pretty severe whackage over the
last two weeks. It is now below all DMAs and in very short term, short term,
and intermediate term downtrends. Plus there is no visible support between
current levels and the 10/23 low. This suggests my ‘inflation has seen its lows’
scenario is on track; and it certainly explains the stomachache in the equities
market. This is a market in search of a bottom and a warning to do nothing
until that bottom is found.
Gold, while down, has held up better than I would
have expected given the severe damage to bonds (higher rates). Again, the explanation
may be explained by rising fears of inflation. The chart itself gives me no
indication of direction: (1) it made a higher lower followed by a slightly
higher high followed by a lower low, then a lower high and (2) it appears ‘stuck’
between its 50 and 100 DMAs. The link below suggests a break to the upside is
coming; but the coward in me says ‘do nothing’ until that break is established.
Time to move.
https://www.zerohedge.com/the-market-ear/gold-time-move
Speaking of whackage, the dollar took in the snoot
in the prior week, resetting its 50 DMA from support to resistance. On the
other hand, it remains (1) above its 100 and 200 DMAs, (2) in an intermediate
term uptrend and (3) has that massive gap down open that needs to be filled. Charts
like this give me the willies; so I withhold comment until stability returns.
Friday in the charts.
https://www.zerohedge.com/market-recaps/stocks-break-losing-streak-santa-rally-slumps-bitcoin-black-gold-jump-over-holidays
Fundamental
Headlines
The Economy
Week
of 12/23
There were very few stats this week. In the US,
what we got was quite negative as were the primary indicators (zero plus, zero
neutral, two minus). Overseas, the numbers were slightly upbeat.
Week of 12/30
Here, the data improved both in volume and direction.
The reports were positive in total though there was one minus primary indicator.
The international stats turned negative.
The dearth of information notwithstanding, the
numbers more or less supported my ‘muddle through’ thesis for the economy. While
there was no inflation data, I continue to believe that policy comments out of
the future Trump administration regarding tariffs and tax cuts only raise the
odds that my forecast (inflation in the rear view mirror) will come to fruition.
To be sure, the cost cutting proposals could be an offset but (1) Trump has the
power to impose tariffs unilaterally, and (2) it is a lot easier to get
congress to cut taxes than it is to cut spending.
Bottom line: my outlook remains: (1) the economy
‘muddles through’ and (2) inflation has likely seen its lows. But the level of
economic uncertainty is higher than normal, at least in the short term, and all
economic forecasts (including my own) should be viewed accordingly.
https://bonddad.blogspot.com/2025/01/ism-manufacturing-index-improves-in.html
My favorite optimist
disagrees with me on inflation.
https://scottgrannis.blogspot.com/2025/01/monetary-policy-trumps-tariffs.html
US
International
The December Japanese services PMI was 50.9 versus
forecasts of 51.4; the composite PMI was 50.5 versus 50.8; the December Chinese
Caixin services PMI was 52.2 versus 51.7; the composite PMI was 51.4 versus
51.5; the December German services PMI was 51.2 versus 51.0; the composite PMI
was 48.0 versus 47.8; the December EU services PMI was 51.5 versus 51.4; the composite
PMI was 49.6 versus 49.5; the December UK services PMI was 51.1 versus 51.4;
the composite PMI was 50.4 versus 50.5.
The December German CPI was +0.4% versus expectations
of +0.3%.
December UK new car sales fell 0.2% versus consensus
of -0.5%.
Other
Fiscal Policy
The
contradictions in Trump’s proposed economic policies.
https://www.civitasinstitute.org/research/the-puzzles-of-trumponomics-2-0
David
Stockman on the coming debt ceiling crisis.
https://www.zerohedge.com/political/david-stockman-brewing-us-debt-ceiling-crisis
Despite the negatives, the US still has a lot going for it.
https://www.bloomberg.com/opinion/articles/2025-01-03/america-still-leads-the-world-in-all-the-ways-that-matter?srnd=homepage-americas
Tariffs
Trump may be backing off his tariff threats.
https://www.zerohedge.com/markets/dxy-tumbles-after-wapo-says-trump-aides-mull-dialing-back-universal-tariff-plan
China
China’s
economy is doomed.
https://www.zerohedge.com/economics/years-repeat-central-planning-mistakes-have-doomed-chinas-economy
On
the other hand:
https://www.zerohedge.com/military/deutsche-bank-wake-call-sixth-gen
Investing
Nobody knows anything.
https://ritholtz.com/2025/01/nobody-knows-anything-strategist/
Another 20% year?
2024 Review - Another 20% Year. What's Next? - RIA
Valuations and the supporting data.
https://www.zerohedge.com/the-market-ear/mind-gap-growth-strains-tight-conditions-q1-risks
Zeikel’s rules for investing.
https://ritholtz.com/2024/12/zeikel-investing-rules-2/
Bob Farrell’s rules for investing.
The Rules Of Bob Farrell - An Updated Illustrated
Guide - RIA
This is OK advice if you are 25; it is not so
good if you are 65.
https://www.bloomberg.com/opinion/articles/2025-01-03/stay-invested-even-if-the-stock-market-is-frothy?srnd=homepage-americas
TIPS have almost never been this attractive.
https://www.marketwatch.com/story/these-ideal-investments-for-retirees-have-almost-never-been-this-attractive-heading-into-2025-5e520a14?st=FNoMLu
Investor Alert
In my quarterly review, Skyworks Solutions
(SWKS) and Apple (AAPL) no longer met the minimum financial quality criteria
for inclusion in our Aggressive Growth Portfolio. They will be Sold at the
open.
The stock prices of Monolithic Power
Systems (MPWR), Pool (POOL) and Marketaxess Holdings (MKTX) have fallen within their
Buy Value Ranges. Accordingly, the Aggressive Growth Portfolio will purchase a
one-half positions at the open.
This leaves the cash position of the
Portfolio at roughly 20%.
News on Stocks in Our Portfolios
What I am reading today
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