8/4/25
The Market
Technical
The S&P had a lousy week and an even worse
Friday. It broke below the uptrend line off its April 7th low. However,
it remains (1) above all three DMAs and (2) in uptrends across all timeframes.
Plus, Friday’s large gap down open provides some magnetic pull the upside. The first
visible support level is the 50 DMA (~6126); so, I wouldn’t get too panicky
until (and unless) it successfully challenges that DMA. On the other hand, I would
be moving out of any long trading positions or stocks that are in their Sell
Half Range.
August anxiety.
https://www.zerohedge.com/the-market-ear/august-anxiety-arrives
Walking back the Sweeney Top call (sort of).
https://www.zerohedge.com/the-market-ear/checking-sweeney-top
TLT had another good week, successfully resetting
its 50 DMA to support and challenging its 100 DMA (now resistance; if it remains
above it through the close on Tuesday, it will revert to support). Friday’s pop
was undoubtedly helped by the poor nonfarm payrolls report. And I suspect that
it will shortly get support from a more dovish Fed narrative. Nonetheless, it
remains below its (100 DMA?) 200 DMA and it downtrends across all timeframes. If
it successfully challenges its 100 DMA, then it will be time to drop the
assumption that the trend remains down.
GLD had a topsy turvy week, pushing below its 50
DMA, then bouncing off its 100 DMA and logging a big gap up open on Friday in
which it closed back above its 50 DMA. So as of the close Friday it is once
again above all DMAs and in uptrends across all timeframes. Assuming the Fed
starts sounding a bit more dovish and the inflation numbers remain on the high
side (thank you, tariffs & the BBB), I wouldn’t be surprised by another big
run up in gold. (I know, I sold half my position on Friday; but I will probably
buy it back.)
In total, the dollar had a good week---but highly
volatile. Three of the five trading days saw gap opens---two up and one down. In
the process, it reset its 50 DMA and then unsuccessfully challenged its 100
DMA. It remains above the very, very short term up trend and has support there
as well as the lower boundary of its short term trading range. Nevertheless, if
an interest rate cut is (being anticipated) coming and inflation increasing, I am
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 with the inflation
indicators positive (two plus, two neutral). The primary indicators were evenly
balanced (two plus, two minus). That said the standout datapoint was the July
nonfarm payrolls number---it was a big, fat negative.
Inside that jobs report.
Overseas, the stats were overwhelmingly positive,
though the price data was all negative.
So, the numbers were basically supportive of (1) my
‘muddle through’ scenario as well as (2) my ‘inflation is as good as it is
going to get’ forecast.
On the policy front:
(1) the FOMC left the Fed Funds rate unchanged with
Powell sounding hawkish in his presser; though I suspect that Friday’s nonfarm
payroll report as well as huge downward revision in May and June will increase
the pressure to lower rates.
(2) Trump’s tariff deadline expired and true to his
word, he jacked up the rates on all those countries that have not yet cut a
deal---with the exception of China and Mexico---both of which are major trading
partners. I continue to believe that while this is not a plus for
trade/economic growth, there is a positive from the fiscal standpoint [i.e.,
higher taxes/smaller deficit].
Note: there remains the question of whether or not
the president has the constitutional authority to raise tariffs.
https://ritholtz.com/2025/07/tariffs-overturned/
A rough day in court.
Bottom line. Short term, I remain in the ‘muddle
through’ camp. Longer term, current fiscal policy continues to be a major
negative, leaving the overall bottom line (i.e., larger deficits, more national
debt) unchanged. Which means slower growth and higher inflation.
Another step towards recession.
https://bonddad.blogspot.com/2025/08/july-jobs-report-awful-report-that.html
As always, I have to include the caveat that
this is all dependent on Trump not turning everything on its head. So my
conviction level is low on economic growth but much higher on the long term
outlook on inflation.
With the Market currently richly valued, I remain
on the sidelines (except for my trading positions in GDX and ETH) anticipating
reducing or hedging my equity position when this latest
run is over. (I cut both holdings in half and added a small position in the S&P
short [SH].)
US
International
Other
June median
household income.
https://politicalcalculations.blogspot.com/2025/08/median-household-income-in-june-2025.html
Monetary Policy
Trump’s
Taylor Rule.
https://econbrowser.com/archives/2025/07/guest-contribution-trumps-taylor-rule
The Fed’s competence, not its independence, should be
the issue (good analysis, bad conclusion).
The
difference between inflation and currency debasement.
https://www.zerohedge.com/markets/debasement-what-it-and-isnt
Investing
The risk of too much optimism.
https://www.zerohedge.com/markets/risk-too-much-optimism
Speculators should be wary.
You are getting paid nothing to risk money in
the stock market.
The latest from BofA.
https://www.zerohedge.com/markets/hartnett-macro-momentum-and-misfit-trades
Strong physical demand for gold in Asia.
News
on Stocks in Our Portfolios
What I am reading today
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