2/18/25
The Market
Technical
The S&P finished the week up slightly. Importantly
though, it made a higher high and ended above its all-time high. Plus, it is
above all DMAs and in uptrends across all timeframes. On the other hand, it
barely eked out that higher close and volume was unimpressive. At the moment,
follow though is key.
TLT ended the week basically unchanged but had a
wild ride between Monday and Friday. As it did the prior week, it traded up to
the upper boundary of its very short term downtrend as well as finishing above its
50 DMA (if it remains there through the close today, it will reset to support).
That said, it remains below all DMAs and in very short term, short term, and
intermediate term downtrends. I have said several times over the last weeks
that TLT is a market in search of a bottom. That remains the case.
GLD had its first hiccup since mid-December---sprinting
higher Monday through Thursday, then giving it all back on Friday. The good
news is that it closed a modest gap up open in the process. Let’s see if this slight
correction has any legs. If so, it might offer the opportunity for another
trade.
Three gold charts worth watching.
https://www.zerohedge.com/the-market-ear/3-gold-charts-we-are-watching-5
Three reasons for higher silver prices.
What the revaluation on US’s gold
stock would look like.
The dollar continued its downward path, pushing
through its 100 DMA (now support; if it remains there through the close today,
it will reset to resistance) and making a fresh lower low. The good news is
that it is above its 200 DMA, is in short and intermediate term uptrends and
has that massive gap down open that needs to be filled.
It
seems likely that this pin action is all related to the uncertainty being
created by Trump’s policy blitzkrieg. It will probably stay that way until
there is clarity on that issue.
Friday in the charts.
Ten charts from Goldman’s head of asset
allocation.
https://www.zerohedge.com/markets/these-are-10-most-popular-charts-goldmans-trading-floor-week
Plus.
https://dailyshotbrief.com/the-daily-shot-brief-february-14th-2025/
Fundamental
Headlines
The Economy
Not many stats last week. But what there was packed
a punch. Overall, the data was negative with the primary indicators very
downbeat (one up, three down---which, as a reminder, was exactly the count the
prior week). In addition, there are some anecdotal warnings that point
potentially at a slowdown/recession---(1) new home construction, (2) tariffs [I
have covered this ad nauseum] and (3) massive budget cuts [$1.5 trillion based
on the just announced house budget] which while positive/necessary in the long
run will have a negative impact on economic growth short term. These factors at best suggest a very weak
‘muddle through’ economy and, at worst, a recession. I am not altering my forecast,
but I am on alert.
On the inflation front, all last week’s reported
data both here and abroad were negative. So that part of my forecast (inflation
as good as it is going to get) remains solid.
https://www.apolloacademy.com/when-history-rhymes/
Overshadowing all of this is the Trump revolution
which keeps the level of uncertainty extremely high---meaning my confidence in
my forecast is low. Nonetheless, it remains (1) the economy muddles through,
(2) inflation high and rising.
https://www.ft.com/content/1529da3b-24fa-4728-ae1a-180df1782c7a
US
The February NY
Fed manufacturing index came in at 5.7 versus forecasts of -1.0.
International
Q4 preliminary Japanese GDP grew 0.7% versus
projections of +0.3%; Q4 preliminary capital spending was up 0.5% versus +0.1%;
Q4 preliminary private consumption was up 0.1% versus -0.3%; December
industrial production was down 0.2% versus +0.3%.
Q4preliminary UK labor productivity was up 0.7% versus
estimates of -0.1%; the December unemployment rate was 4.4% versus 4.5%; December
average earnings rose 4.4% versus +4.5%.
The December EU trade balance was +E15.5 billion
versus predictions of +E14.4 billion.
The February EU economic sentiment index came in at
24.2 versus consensus of 24.3; the February German economic sentiment index was
26.0 versus 20.0; the February German current conditions index was -88.5 versus
-90.0.
Other
The latest Q1 nowcasts.
https://www.capitalspectator.com/moderate-steady-growth-expected-for-us-q1-gdp/
The consumer’s balance sheet is improving.
Update on big four recession indicators.
Retail sales and employment.
https://dailyshotbrief.com/the-daily-shot-brief-february-14th-2025/
A different take.
https://mishtalk.com/economics/retail-sales-crash-did-the-consumer-finally-throw-in-the-towel/
Overnight News
Top US and
Russian officials started meeting in Saudi Arabia to discuss how to end the war
in Ukraine, without anyone from Kyiv taking part. France’s Emmanuel Macron
spoke separately with Donald Trump and Volodymyr Zelenskiy on aligning with the
US on peace talks.
Bearishness among individual investors—measured by
the percentage who expect stock prices to fall over the next six months—reached
47.3% for the week ended Feb. 12, according to the latest survey from the
American Association of Individual Investors. That is the highest level since
November 2023.
Monetary Policy
The Fed has stopped pretending
that inflation is going away.
https://www.zerohedge.com/markets/fed-has-stopped-pretending-price-inflation-going-away
Fiscal Policy
Potential mass social
security fraud.
https://www.zerohedge.com/political/might-be-biggest-fraud-history
Inflation
CPI
is deeply flawed.
https://mishtalk.com/economics/the-cpi-is-deeply-flawed-and-the-fed-feeds-those-flaws/
Tariffs
The
method in Trump’s reciprocal tariff madness.
https://www.zerohedge.com/markets/wall-street-reveals-method-trumps-reciprocal-tariff-madness
Investing
The latest from BofA.
https://www.zerohedge.com/markets/hartnett-why-red-hot-cpi-print-blessing-disguise-stocks
Summary of Q4 earnings.
The stability/instability paradox.
The Stability-Instability Paradox - RIA
Stocks are a bit pricey.
https://www.advisorperspectives.com/commentaries/2025/02/14/loves-me-loves-me-not-he
The unintended consequences of rebalancing.
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=5122748
The bubble indicator.
https://www.zerohedge.com/markets/bubble-indicator-stock-market-overheating
News on Stocks in Our Portfolios
FedEx (NYSE:FDX) declares $1.38/share
quarterly dividend, in line with previous.
Illinois Tool Works Inc. (NYSE:ITW) declares $1.50/share
quarterly dividend, in line with previous.
Genuine Parts press release (NYSE:GPC): Q4 Non-GAAP EPS
of $1.61 beats by $0.06.
Revenue of $5.8B (+3.3% Y/Y) beats by $90M.
What I am reading today
The
60 minutes narrative aside, there is a perfidious pattern to USAID spending.
https://www.zerohedge.com/political/pattern-beneath-usaid-and-architecture-perception
Making
better decisions.
https://alphaarchitect.com/2025/02/a-navy-seal-says-making-better-decisions-is-simple/
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