1/13/25
The Market
Technical
The (so far) mini correction continued last week. The
S&P (1) reset its 50 DMA to resistance, (2) made a new lower low and (3) is
poised to challenge both its 100 DMA [~5820] and the lower boundary of its very
short term uptrend [~5800]---which together should offer decent support. But I wouldn’t
be making bets on that trade. If they do hold then the next issue will be the
ensuing high, i.e., whether it is higher (thereby breaking the downtrend) or
lower (not). On the other hand, if those levels fail, the next visible support
is the 200 DMA (~5572).
Rising rates and rising fear.
https://www.zerohedge.com/the-market-ear/rising-rates-and-rising-fear
Getting close to buying the dip.
https://www.zerohedge.com/the-market-ear/getting-close-btd-opportunity
Technical breakdown levels to watch.
https://www.zerohedge.com/markets/consolidation-continues-technical-breakdown-levels-watch
Hedge funds dump stocks.
https://www.zerohedge.com/markets/hedge-funds-dump-stocks-2nd-straight-week-funding-spreads-collapse
Like stocks, the destruction continued. TLT remains
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 with the possible exception of the lower boundary of that very short term
downtrend. And I wouldn’t hang my hat on that. 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.
Something odd is happening in the bond market.
https://www.zerohedge.com/the-market-ear/something-odd-happening-bond-markets-should-we-worry-0
Despite higher interest rates (lower bond price)
and a stronger dollar (see below), gold not only rallied but (1) bounced off
its 100 DMA to the upside, (2) reset its 50 DMA to support and (3) pushed
through the downtrend off its 10/30 high. If it holds above that trendline then
its next challenge is the upper boundary of its very short term trading range;
and if that doesn’t hold, it is on to new all-time highs. But that is getting a
bit ahead of ourselves. Still, it is good for a trade to its former high.
The everything hedge.
https://www.zerohedge.com/the-market-ear/gold-everything-hedge-waking
The dollar made a partial recovery from last week’s
plunge---likely on the hopes that the bond guys will force the Fed to raise
rates or at least stop lowering them. While plenty technical damage has been done,
it is still (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.
Friday in the charts.
Fragile markets.
Fundamental
Headlines
The Economy
The stats last week in total were quite negative
though the primary indicators were balanced. Ditto overseas except that they
were even more disappointing than our own. Clearly, in and of themselves, not
supportive of a ‘muddle through’ scenario. However, (1) it was one week’s data
which hardly makes a trend and (2) indeed, one would expect some unevenness in
the numbers flow in a ‘muddle through’ forecast.
Certainly, investors were not concerned with last
week’s biased leaning of the stats as interest rates continued to rise on fears
that the economy was strengthening to the point that the Fed would halt its
rate cutting policy. And that notion got a dramatic boost on Friday with the
blow out nonfarm payrolls report---which supports my ‘inflation is as good as
its going to get’ call.
A deep dive into those numbers.
https://bonddad.blogspot.com/2025/01/december-jobs-report-ho-ho-ho-santa.html
On the other hand.
https://www.capitalspectator.com/introducing-the-us-5-year-yield-opportunity-index/
Add in the inflationary implications of the Donald’s
stated intention to raise tariffs and cut taxes and you have a formula for
stagflation---not great for the economy nor the Market. To be sure, his 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.
Inflation reaccelerating.
https://www.apolloacademy.com/inflation-reaccelerating/
US
International
December Chinese vehicle sales were up 10.5% versus
consensus of +6.4%.
Other
Update on big four recession indicators.
https://www.advisorperspectives.com/dshort/updates/2025/01/10/the-big-four-recession-indicators
More Q4 nowcasts.
https://www.calculatedriskblog.com/2025/01/q4-gdp-tracking-18-to-27-range.html
Fiscal Policy
The
era of free government is over.
China
China’s
central bank worried about deflation.
https://www.nytimes.com/2025/01/10/business/china-central-bank-bonds.html
Investing
Goldman joins the argument that valuations deserve
to be higher today than in the past.
Rates are only at the low end of normal.
Repeating our mistakes.
Investor Resolutions For 2025 - RIA
A bitcoin critic.
News on Stocks in Our Portfolios
Paychex (NASDAQ:PAYX) declares $0.98/share
quarterly dividend, in line with previous.
What I am reading today
Why
Greenland is important.
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