5/19/25
The Market
Technical
The S&P continued to push higher, closing above
both its 100 and 200 DMA and resetting them from resistance to support---which
provides additional strength to the notion that we have seen the bottom. The
question now is, is it going to make a new high. Weighing in favor is that there
is no visible resistance between the current level and that high (~6147). Against:
(1) there are those two gap up opens that need to be closed and (2) currently stocks
are overbought. Of course, it can make a
new high and then settle back and close those gaps. Or it could do the opposite.
Whatever the path, my strategy is not to chase
stocks at these levels but to wait for a correction to add to any holdings---assuming
Trump doesn’t come up with another brilliant program like Liberation Day or Big
Beautiful Bill.
Goldman thinks that this rally can continue (but I think
that they are wrong on inflation).
https://www.zerohedge.com/markets/buy-may-and-let-it-play-goldman-traders-see-near-term-overshoot-sp
The long bond bounced off the lower boundary of its
very short term trading range for the third time---makes me think this could be
the low and/or my observation last week could be spot on: the
chance of a more sanguine outlook on tariffs will cushion any momentum to the
downside. On the other hand, the risk of inflation still weighs to the upside
given the Big, Beautiful Bill in its current form. That would suggest further
downside in TLT. This all makes me think that while we may have seen the worst,
there is little chance of a meaningful rally in the near future, at least until
we get some further clarity on tariffs and spending.
After making a lower high, GLD sold off on the week
making a new lower low. It is now resting on its 50 DMA. If it bounces, it will
likely be good for a trade (if you don’t already own it). If it doesn’t, then
the next support levels are at its 100 DMA and the lower boundary of its very short
term uptrend---then a rebound might be playable. In the meantime: It
remains well within a very short term uptrend and in uptrends across all other
time frames as well as above all DMAs. Let’s see where the correction goes but for
the moment, I would stay with what works.
The dollar bounced hard last week. In the process, it
traded up to its 200 DMA (now resistance) and the upper boundary of a downtrend
off its 12/19 high. Let’s see if it can push through those resistance levels. But
for the moment, the assumption remains that it is heading lower.
Friday in the charts.
Friday in the technical stats.
https://www.barchart.com/stocks/momentum
https://www.barchart.com/stocks/sectors/sectors-heat-map
Fundamental
Headlines
The Economy
The US stats last week were tilted slightly to the
upside as were the primary indicators (two plus, two neutral, one minus). That
makes me feel somewhat better about the growth prospects for the economy, i.e.,
the odds of a ‘muddle through’ scenario improved.
I don’t think that we can dismiss entirely the risk
of another nuclear blast coming out of the White House that would again raise
the odds of recession. But hopefully that risk is falling.
https://talkmarkets.com/content/us-markets/recession-probabilities-decline?post=498082
Overseas, the numbers were again extremely
upbeat---helping further to assuage my recession anxieties.
As for my highly uncertain outlook on inflation,
that gained some clarity last week as we got a look at the horrible, terrible
new fiscal budget which the house is now trying to push across the goal line.
As you know, for years one of my biggest economic concerns has been the
irresponsible fiscal management of our country’s finances. Both parties are
equally guilty. Trump/the GOP were in his first term and this latest Big,
Beautiful Bill is in my opinion is disgraceful. (Trump has the penchant for
labelling his policies the exact opposite of the likely result---the other
example being Liberation Day).
And yet.
In its current form, this new example of fiscal
irresponsibility continues our march to higher inflation, higher interest rates,
and a declining dollar. To be sure, DOGE’s efforts along with whatever new
tariff revenue will help slow the growth of our deficit/national debt. But
more, much more is needed to stop/reverse the trend of spending.
And this just isn’t my opinion.
https://www.zerohedge.com/geopolitical/moodys-downgrades-usa-credit-rating-aaa
Bottom line. Short term, the odds of recession, in
my opinion, continue to drop. Longer term, the inflation outlook is more
visible and getting worse.
US
International
The April EU CPI came in at +0.6%, in line.
Other
This seek in the economy.
ECONOMIC WEEK AHEAD: May 19–23
Investing
The latest from BofA
https://www.zerohedge.com/markets/hartnett-how-trade-next-big-bull-market
News on Stocks in Our Portfolios
What I am reading today
The
most accident prone cars in America.
https://www.zerohedge.com/technology/these-are-most-accident-prone-cars-america
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