8/25/25
The Market
Technical
The
S&P once again traded below the newly re-established uptrend off its April
lows. Then, in a mighty effort on Friday attempted to recover the trend but
failed. That is not to say that it won’t. Clearly, investors got jiggy with
Powell’s Jackson Hole speech; and barring a negative news event, it seems
likely that there will be follow through to the upside. Supporting that notion
is that the index is (1) above all three DMAs and (2) in uptrends across
all timeframes. That said, I continue to be worried about valuation levels. This
is a market to trade not invest in long term. If you do, be sure to have close
in stops. I still hold GDX and ETH as trades.
Chart of the week.
https://entrylevel.topdowncharts.com/p/chart-of-the-week-the-best-vs-worst
Where are the bulls?
https://www.zerohedge.com/the-market-ear/where-are-bulls
If you see a bubble, ride it.
https://www.zerohedge.com/the-market-ear/if-you-see-bubble-ride-it-1
TLT rallied on the week and not just because of
Powell’s Friday gift, in the process recovering above its 50 DMA (now resistance;
if remains there through the close today, it will reset to support) and closing
right on its 100 DMA (now resistance). Nevertheless, (1) it remains below its
200 DMA and in downtrends across all timeframes and (2) its bounce on Friday was
considerably less enthusiastic than that of equities. That suggests that inflation
remains a bigger concern to the bond guys than your friendly stock jockey.
After being flat from Monday through Thursday, GLD rallied
on Friday to close up on the week, ending back above its 50 DMA (now
resistance; if it remains there through the close today, it will revert to
support). While it remains above its 100 and 200 DMAs and is in uptrends across
all time frames, it still needs to make a higher high before I feel comfortable
that the uptrend is intact.
The
dollar clearly didn’t like Powell’s dovish move, plunging back below its 100
DMA and breaking the very short term uptrend off its 7/1 low. While it is not
an encouraging chart, it does have three near in support levels (the 50 DMA,
the lower boundary of a very, very short term uptrend and the lower boundary of
its short term trading range) that could help it construct a double bottom. That
notwithstanding, like GLD, it doesn’t seem to be buying the stock boys’
enthusiasm over the prospects of a rate cut. I remain hard pressed to think
that the worst is over.
Friday in the charts.
Friday in the technical stats.
https://www.barchart.com/stocks/momentum
https://www.barchart.com/stocks/sectors/rankings
Fundamental
Headlines
The
Economy
The stats last week were mixed (for the second week
in a row) though the primary indicators were positive (one plus, one neutral)
with no price measures. Overseas, the data was very upbeat including three
positive inflation readings.
So, the numbers were supportive of my ‘muddle
through’ scenario. My ‘inflation is as good as it is going to get’ forecast---not
so much.
Of course, the week was dedicated to guessing what
Powell would say Friday morning at the Jackson Hole conference. And he didn’t
disappoint. The narrative was dovish
resulting in spike in both the odds of September rate cut and the Market.
It also increases the likelihood that both legs of
my outlook will come to fruition. Short term, I remain in the ‘muddle through’
camp. Longer term, inflation is as good as it is going to get’ and, indeed,
with the onset of tariffs and the deficits from the BBB, it could become an
even larger problem than I previously thought.
US
July building permits fell 2.2% versus
estimates of -2.8%.
The July Chicago national activity index came in at
-0.19 versus expectations of -0.2.
International
The June Japanese leading economic indicators were reported
at 105.6 versus projections of 106.1.
The August German business climate index was 89.0
versus consensus of 87.0; the July current conditions index was 86.4 versus
86.6.
Other
Update on Q3 nowcast.
https://www.capitalspectator.com/us-gdp-nowcasts-continue-to-indicate-slower-q3-growth/
More.
https://www.calculatedriskblog.com/2025/08/q3-gdp-tracking_22.html
Not so fast.
ECONOMIC WEEK AHEAD: August 25-29
Overnight News
Despite Powell’s speech, clear divisions remain
among Fed officials. The St. Louis Fed’s Alberto Musalem said he’ll need more
data, Reuters reported, while Chicago’s Austan Goolsbee pointed out he’s still
more concerned about the inflation side of their mandate than employment.
South
Korea's President Lee said they will ultimately arrive at a reasonable trade
deal with the US and he expects to discuss with US President Trump security and
defense costs, as well as tariff negotiations.
India’s Foreign Minister said trade negotiations
are still going on and they have lines to maintain and defend, while he added
the lines India cannot cross are the interests of farmers and small producers.
Furthermore, he said India buying Russian oil was never brought up before the
public announcement of tariffs and issues about buying Russian oil are not
being used to target other major users such as China and the EU.
Fiscal Policy
If the new BLS head is as bad as his critics
say, that is a win.
Three economists discuss current economic
issues.
https://www.nytimes.com/2025/08/21/opinion/trump-economy-tariffs-data.html
This is the good news side of the BBB. But the
author fails to mention its impact on the deficit/national debt.
https://thehill.com/opinion/finance/5462354-expanding-economic-opportunity-law/
And speaking of the deficit/debt (which I wish
I wasn’t).
What if Treasuries are no longer a safe haven?
https://mrzepczynski.blogspot.com/2025/08/what-if-treasury-bonds-are-not-safe.html
Mimicking China is not the way to win the race
against China.
Investing
Is value investing making a comeback?
https://www.advisorperspectives.com/commentaries/2025/08/22/value-investings-comeback
How long can this lopsided market continue to
prosper?
https://www.nytimes.com/2025/08/22/business/stock-market-nvidia-trump.html
Update on Q2 S&P earnings.
https://talkmarkets.com/content/us-markets/sp-500-earnings-dashboard-25q2-friday-aug-22?post=517404
The downside to private equity.
Bubble risks grow in Chinese market.
https://www.zerohedge.com/markets/bubble-risks-grow-chinas-bull-run-defies-angst
In Europe, not so much.
https://www.zerohedge.com/the-market-ear/things-can-only-get-less-worse-long-trade-europe
News
on Stocks in Our Portfolios
What I am reading today
Monday
morning humor.
10 Ways Babies Are Smarter Than Liberals |
Babylon Bee
What
is Alpha School?
Cash Transfers Fail? - by Arnold Kling - In
My Tribe
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