The Morning Call
1/26/26
The
Market
Technical
Despite last week’s four day rally, the
S&P failed to recover above its former all-time high. That negates the
prior week’s breakout. That doesn’t mean that it is all over but the
shouting---just that, all the enthusiasm from the big boy’s trading desk
notwithstanding, there are still plenty of sellers around. So, the question
remains, are we at a top or is it just taking longer for stocks to consolidate
than many thought (hoped)? That question is not for me to answer, it is for Mr.
Market; and so far, there is no answer. Meaning, do nothing until He tells you
the answer. Until I see a strong buying impulse, I remain of the opinion that
this is a Market to be traded not invested in.
Margin
debt up in December.
The latest from
Goldman’s desk.
Fading momentum.
A recipe for disaster.
https://www.zerohedge.com/the-market-ear/short-vol-long-leverage-buy-dip-recipe-disaster
Despite all the
happy talk about lower rates/inflation, bond investors don’t seem to be buying
it. Despite the rally last week, the long bond remains below all three DMAs (though
it is about to challenge its 200 DMA) and in downtrends across all timeframes
(including a very short term downtrend I marked in green). I continue to
believe that the only circumstance I can see pushing rates meaningfully lower
would be a recession.
Gold continues to
soar, closing above all three DMAs and in uptrends across all timeframes. While
there is no reason to question the long term trajectory of GLD, short term it
seems a bit overextended. I Sold my GDX trading position at the close on Friday
but will most likely re-establish it on any pull back.
Scratch the dollar rally. It reaffirms its status as the ugliest
on the books.
Friday in the
charts.
Friday in the technical stats.
https://www.barchart.com/stocks/momentum
https://www.barchart.com/stocks/sectors/rankings
https://www.barchart.com/stocks/signals/new-recommendations
Fundamental
Headlines
The
Economy
The
US stats last week were again mixed; the primary indicators were again upbeat (four
plus, three neutral, one minus); and the inflation data was negative (one
neutral, one negative). Overseas, the data was extremely positive with one
upbeat, one neutral and one downbeat price indicator.
Nothing in this data set warrants a change in my economic growth forecast
(muddle through) though Trump’s ongoing attempts to show that he concerned
about ‘affordability’ only adds uncertainty to this outlook because some of
these measures would damage not help the economy.
My ‘inflation is as good as it is going to
get’ prediction is not quite as solid, though the odds seem to be improving. While
some Street pundits are suggesting a declining rate of inflation, there has of
late been an uptick in the level of concern by others. In addition, there has
yet to be any real solid evidence pointing to a decline in the inflation rate---in
spite of the built in statistical drop in housing costs (Owners’ Equivalent
Rent).
https://www.zerohedge.com/the-market-ear/what-if-second-wave-inflation-upon-us
That said, recent speeches/comments by
individual FOMC members indicate a rising concern about inflation. So, while
this seemingly more cautious approach to inflation lifts my confidence near
term in my forecast, if the Fed really got serious about bringing inflation
down, I would clearly have to revise it. But I will believe it when I see it---especially in
light of Trump’s full court press to lower rates.
US
November durable
goods orders rose 5.3% versus forecasts of +1.1%; ex transportation, they were
up 0.5%, in line.
The November Chicago Fed national activity
index came in at -.4, in line.
International
The November Japanese
leading economic indicators were 109.9 versus projections of 110.5.
The January German
business climate index was reported at 87.6 versus estimates of 88.5; the
January current conditions index was 85.7 versus 86.5.
Other
Globalization hasn’t failed America.
https://www.cato.org/blog/globalization-hasnt-failed-america-politicians-have
Consumer sentiment improved in January.
Update on big four recession indicators.
https://www.advisorperspectives.com/dshort/updates/2026/01/23/the-big-four-recession-indicators
Will Q4 GDP growth keep pace with Q3?
https://www.capitalspectator.com/will-us-q4-growth-exceed-q3s-strong-pace/
Monetary
Policy
The Fed not seen cutting rates until June.
Fiscal
Policy
One easy way to address ‘affordability’.
Some of Trump’s economic policies are right
out of the progressive playbook.
Just what the doctor ordered---more spending and
more debt.
https://www.zerohedge.com/political/house-week-passed-839-billion-defense-bill-bursting-pork
And here is what we are paying for.
https://www.zerohedge.com/political/pentagon-releases-new-defense-strategy-4-things-know
Inflation
The trends in health insurance costs.
https://politicalcalculations.blogspot.com/2026/01/trends-in-us-consumer-out-of-pocket.html
Recession
Consumers
may be in a foul mood but they are making money and spending it.
Investing
Geopolitical risk
on.
MARKET
CALL: Geopolitical Risk-On Trade Causing Metals Meltup
The
latest from BofA.
https://www.zerohedge.com/markets/hartnett-4ps-behind-long-detroit-short-davos
Investment risk is underappreciated.
https://www.zerohedge.com/markets/investment-risk-underappreciated
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