6/16/25
The Market
Technical
This chart is fairly self-explanatory---the S&P
has been on a sizz, remaining above all DMAs and in uptrends across all time
frames. Except last Friday, it dipped below the trendline off its 4/7 low. We
need follow through to determine if this is a trend reversal or just a one
(few) day reaction to the middle east turmoil. My gut is that we are in for a correction
of some sort. How big---to be determined.
https://www.zerohedge.com/the-market-ear/tactical-backdrop-has-decisively-turned
The bond vigilantes still have the bond market by
the throat, leaving TLT in downtrends across all time frames and below all DMAs.
This reinforces my guess that the next move in stocks is down.
GLD continued on its push higher---unusual when
interest rates are rising but also calling into question the longevity of the recent
downtrend in inflation. At the moment, it remains well within a very short term
uptrend and in uptrends across all other time frames as well as above all DMAs.
……stay with what works.
Gold versus the euro as a reserve asset (bear in
mind this was written by a Brit).
https://www.ft.com/content/6d6a04d3-2fe6-4461-a9f9-bc3a0cc2a582
The dollar continue to get hammered. That helps explain
GLD’s run but is exactly the opposite of what one would expect in an environment
of rising interest rates---though if all the speculation about a Fed rate cut
sooner than expected proves correct, that would explain it.
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
Week
of 5/25
US stats that week were quite positive (primary
indicators: four plus [including one inflation number], two
neutral [including one inflation number], zero negative). Overseas, the
datapoints were slightly upbeat, though the inflation stats were awful (two
neutral, two negative). Much of the positive tilt was due to reports being less
bad rather much better.
Week of 6/2
US stats were the mirror image of the prior week, i.e.,
very negative with down primary indicators outnumbering the positives three to
one. Overseas, the data was plentiful but balanced; although there were two
plus reads on inflation.
Last
week
There was very few US numbers last week, although
they did include one upbeat inflation stat. Overseas, the data was balanced but
once again positive inflation figures were a standout.
Based on these datapoints, I see no reason to alter
my ‘muddle through’ economic forecast. However, as is obvious, the inflation
numbers are coming in much better than I anticipated. Indeed, more week of positive
price data and I will have to concede that inflation is not ‘as good as it is
going to get’---the main import of which is that there will increasing reassure
on the Fed to cut rates.
https://www.wsj.com/economy/the-case-for-rate-cuts-is-growing-4eb75bc1?mod=economy_lead_pos3
But is it too soon to get jiggy?
https://www.nytimes.com/2025/06/13/business/economy/tariff-trade-war-inflation.html
That said, I still think that as long as the US
government can’t get its fiscal house in order, the threat of rising inflation
is still with us for the long term---and it could be made worse if the Fed gets
aggressive in lowering interest rates,
One more observation; it is that it is becoming
increasingly clear that Scott Bessent, the Secretary of the Treasury, is having
a moderating influence on Trump’s propensity to toss grenades; and that is a blessing.
Trump’s latest moves notwithstanding.
https://www.ft.com/content/437a6438-742a-42fe-97ff-b427448ce0f6
Although I have to say that businesses and investors
appear to be getting somewhat immunized to Trump’s drama---witness the continuing
flow of positive earnings reports and forecasts. The counter to that is, of
course, the bond boys aren’t buying it; and I think that poses a huge risk to
an otherwise potentially sanguine outlook.
Finally, the Middle East conflict could produce a
potentially disaster scenario. Although that risk seems to be receding:
https://www.zerohedge.com/markets/market-rapidly-evolving-positive-outcome-middle-east
Because of all these things, I am keeping my yellow
warning light flashing.
Bottom line. Short term, the odds of recession, in
my opinion, remain low and the inflation appears to be moderating. Longer term,
current fiscal policy remains a major negative.
US
International
The Q1 EU labor cost index rose 3.4% versus
estimates of up 3.2%.
May Chinese YoY industrial production came in at up
5.8% versus projections of up 5.9%; May YoY retail sales were up 6.4% versus +5.0%;
May YoY fixed asset investments were up 3.7% versus up 3.9%.
Other
Weekly economic indices.
https://econbrowser.com/archives/2025/06/weekly-economic-index-for-data-released-through-6-7
The state of freight.
https://bonddad.blogspot.com/2025/06/the-state-of-freight.html
Monetary Policy
Rate
cuts are overdue.
https://scottgrannis.blogspot.com/2025/06/memo-to-fed-lower-interest-rates-are.html
Fiscal Policy
What
to watch for now.
https://www.advisorperspectives.com/commentaries/2025/06/13/what-watch-now
More.
https://www.advisorperspectives.com/commentaries/2025/06/13/business-owners-need-know-new-tax-bill
Recession
Wolf
Richter’s favorite recession indicator.
https://wolfstreet.com/2025/06/12/recession-watch-my-favorite-recession-indicator-mid-june-update/
Tariffs
How
much of the tariffs can US corporations absorb?
Investing
For those interested in the options market.
https://politicalcalculations.blogspot.com/2025/06/the-trillion-dollar-equation.html
A workshop for traders.
https://traderfeed.blogspot.com/2025/06/a-different-kind-of-trading-psychology.html
The latest from BofA.
https://www.zerohedge.com/markets/hartnett-top-20-charts-2020s
News on Stocks in Our Portfolios
What I am reading today
Five ways to build
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