Monday, May 5, 2025

Monday Morning Chartology

 

 

5/5/25

 

 

The Market

         

    Technical

 

WOW! A second week of healthy price (upward) movement. The S&P pushed through and confirmed a reset of its 50 DMA from resistance to support and is now eyeing a challenge of its 200 DMA. If that proves successful, then what would really cement a change of momentum would be the 200 DMA crossing back above the 100 DMA. Failure to do that would just leave the index in a rally in a bear market. Follow through.

 

The latest rom Goldman’s trading desk.

https://www.zerohedge.com/markets/ultimate-pain-trade-tech-led-rally-all-latest-observations-goldmans-trading-desk

 

Upside massively underpriced.

https://www.zerohedge.com/the-market-ear/goldman-upside-massively-under-priced

 

 

 


 

 

The long bond gave up most of its gains from the prior week. In doing so, it made a lower high while testing and then failing a challenge of both its 50 and 100 DMAs (they remain resistance).  That negates any thought that it had made a firm bottom on January 14th and raises the strong probability that it will retest that low.  I am a bit perplexed at the divergent pin action of stocks versus bonds. I recognize that an end to the tariff chaos would suggest a strong economy (i.e., higher earnings growth and stock prices) and a more hawkish Fed (i.e., higher rates). But ‘an end to tariff chaos’ seems like a push right now. That and the fact that I have always trusted the bond market’s discounting ability over that of the equity markets, I view TLT’s performance as a warning sign for stocks.

 

 

 

 


 

 

GLD continued to consolidate after hitting new highs. However, there is nothing extraordinary about this retreat. 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 inched a little higher last week though it remained solidly in a downtrend. Its performance only adds to the disparate pin action in the stock, bond, and gold markets. But since the moves in the latter two were fractional and my uncertainty level well above average, I am writing this all off to randomness and/or confusion.

 





Dollar doom is overdone.

https://www.ft.com/content/6274a96c-f11d-49a0-aac8-25371376e67d

 

 

            Friday in the charts.

            https://www.zerohedge.com/market-recaps/sps-longest-win-streak-21-years-erases-all-liberation-day-losses-big-tech-bitcoin

 

            Friday in the technical stats.

            https://www.barchart.com/stocks/momentum

            https://www.barchart.com/stocks/sectors/sectors-heat-map

 

    Fundamental

 

       Headlines

 

              The Economy

 

Last week, the stats overall were horrible (bad overseas, really, really bad in the US) though the primary indicators were almost balanced (three up, four down). So a third week in a row of downbeat data. This puts us back on the track we just got off of a month ago---the increasing likelihood of recession (versus ‘muddle through’).

 

And as you know from the articles I have been posting, there are far rougher times in our near future (i.e., the impact of Chinese tariffs working their way through our supply chain---first the ports, then the trucking, then the retailers).

 

Just not yet.

https://econbrowser.com/archives/2025/05/employment-and-business-cycle-indicators-2

 

The good news I suppose is that the level of tariff bombast from Trump has fallen significantly; although to date there has been only token real results from the Donald’s actions.

 

One of the aforementioned negative primary indicators was inflation related. That too is probably only going to get worse---what is about to occur is very similar to what happened with the covid affair and I trust you remember that outcome.

 

At the risk of being repetitious, I don’t fault the Donald for working to right some trade imbalances. But so far, I would judge the ‘art of the deal’ to be a f**king disaster; and unfortunately, likely a longer term negative (1) for our relations with our allies and (2) in his ability to implement his domestic agenda [which I believe would be a major plus for the economy].

 

The $64,000 question is how much of the above is in the price of stocks? On the plus side, nothing I have said is an unknown. On the other hand, the bond market has not been nearly as sanguine about the prospects for ‘muddle through’ and slowing inflation. You know how much more I respect the bond boys discounting abilities versus the stock jockeys.

https://talkmarkets.com/content/global-markets/the-calm-before-the-crack-tariff-fallout-enters-the-real-economy-phase?post=493435

 

Bottom line. Short term, the odds of recession appear to be on the rise again. It is not much better longer term as Trump’s self-induced chaos will only hamper economic growth. At the risk of being labeled ‘wish washy’, if this week is as bad as last, economically speaking, I will likely pull my ‘muddle through’ forecast---again.  I am less sure about inflation and I am leaving that prediction in abeyance pending more clarity.

 

                        US

 

 

                        International

 

                        Other

           

                          YoY heavy truck sales unchanged in April.

                          https://www.calculatedriskblog.com/2025/05/heavy-truck-sales-mostly-unchanged-yoy.html

 

            Monetary Policy

 

              Odds of a June rate cut plunge.

              https://mishtalk.com/economics/june-fed-rate-cut-odds-plunge-on-strong-jobs-report/

 

              Update on the Fed’s balance sheet.

              https://wolfstreet.com/2025/05/01/fed-balance-sheet-qt-14-billion-in-april-2-26-trillion-from-peak-to-6-71-trillion-lowest-since-april-2020/

           

            Fiscal Policy

 

              The never ending tale of waste and fraud.

              https://www.zerohedge.com/political/meet-big-balls-doge-team-sits-down-wide-ranging-interview-details-shocking-examples-waste

 

            Inflation

 

              Global food prices up.

                  https://www.zerohedge.com/commodities/global-food-prices-climb-toward-arab-spring-era-highs-amid-trade-war-turmoil

 

            Tariffs

 

This is a great must read article on why we can’t (and therefore won’t) bring the lion’s share of manufacturing back to America and what we could do to make the right kind of manufacturing easier.

https://www.molsonhart.com/blog/america-underestimates-the-difficulty-of-bringing-manufacturing-back

 

                  China is hurting too.

              Year Of The Snake

 

                Geopolitics

 

              Peace in Ukraine inches closer.

              https://www.zerohedge.com/geopolitical/zelensky-relieved-trump-quietly-dropped-key-demand

 

      Investing

 

            April dividends by the numbers.

            https://politicalcalculations.blogspot.com/2025/05/dividends-by-numbers-in-april-2025.html

 

            Update on valuations.

            https://www.advisorperspectives.com/dshort/updates/2025/05/01/market-valuation-is-the-market-still-overvalued

                https://www.advisorperspectives.com/dshort/updates/2025/05/01/qratio-market-valuation-april-2025

            https://www.advisorperspectives.com/dshort/updates/2025/05/01/pe10-market-valuation-april-2025

                https://www.advisorperspectives.com/dshort/updates/2025/05/01/market-valuation-regression-trend-sp500-april-2025

 

                In praise of diversification.

            https://www.advisorperspectives.com/commentaries/2025/05/02/diversification-versus-sirens-song

 

                The consumer pullback theme gains momentum.

            https://www.zerohedge.com/markets/peak-earnings-pulse-consumer-pullback-theme-gains-momentum

 

    News on Stocks in Our Portfolios

 

Paychex (NASDAQ:PAYX) declared $1.08/share quarterly dividend, 10.2% increase from prior dividend of $0.98.

Cummins press release (NYSE:CMI): Q1 GAAP EPS of $5.96 beats by $1.11.

Revenue of $8.2B (-2.7% Y/Y) beats by $30M.

 

What I am reading today

 

           

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