The Morning Call
2/9/26
The
Market
Technical
What a day! The S&P shot out of the
blocks and didn’t look back, leaving the 100 DMA behind, reversing the earlier
reset of the 50 DMA back to support and closing back above the all-time high on
good volume. Typically, pin action like that is a sign of either the (re)establishment
of a trend or a reflective bounce in a bear market (see below). Given all the
back and forth of the past two months, I am hesitant to say that this is the
beginning of a new uptrend---but it is potentially could be. I am holding my
fire for---you guessed it---follow through.
A flush without a clean out.
https://www.zerohedge.com/the-market-ear/flush-without-cleanout
Is the bubble
behind us?
The technical setup remains fragile.
Tactical upswing
confirmed.
https://www.zerohedge.com/the-market-ear/tactical-upswing-confirmed-0
The bond boys weren’t
quite as excited as the stock jockeys. The long bond remains below all three DMAs
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 (with the caveat that a
more hawkish Fed near term would bring about lower long rates long term). Indeed,
if the move in the S&P is a sign of regained confidence in the economy,
then it would make sense that long rates would remain at current levels or
higher.
Gold was up which
you might expect if investor (speculator) enthusiasm has been rekindled, though
clearly with not quite to the degree reflected in the S&P. It has now made
a higher low; if it can make a new higher high, that might indicate that the
worse is over. But, follow through.
The Japanese ten
year and gold/bitcoin.
https://www.zerohedge.com/the-market-ear/tokyo-love-yields-threaten-another-squeeze-gold-watching
The good news---the dollar bounced off the lower boundary
of its intermediate term uptrend. The bad news, it appears to have made a lower
high. It is still an ugly chart, though the sharp bounce off the intermediate term
uptrend offers hope. Follow through.
Friday in the
charts.
https://www.zerohedge.com/markets/it-over-big-bounce-end-bad-week-ahead-super-bowl
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
Not
much in the way of US stats last week. What there was mixed with no primary and
no inflation indicators. Overseas, the data was also mixed but contained two
positive price data points.
So, nothing here or abroad that would suggest a
need for rethinking of my economic growth forecast (muddle through).
My ‘inflation is as good as it is going to
get’ prediction is not quite as solid. I have linked to a great many opinions
on what a Kevin Warsh Fed would look like. The general consensus being that he
would likely favor lowering the Fed Funds rate but also shrinking the Fed
balance sheet. As a monetarist, I believe that managing the money supply is far
more important in controlling inflation than through interest rates; and downsizing
the money supply is the best way to lower inflation. That doesn’t mean we will
see a restarting of quantitative tightening immediately---Warsh is still only
one vote and many of the Fed members are opposed to that policy. So, the near
term future of money supply growth (and in my opinion, inflation) rests on
Warsh’s ability to persuade those FOMC voting members to restart lowering money
supply growth/shrinking the Fed’s balance sheet.
Hence, I believe that my ‘inflation is as good
as it is going to get’ call is also dependent on how successful Warsh is in
persuading his colleagues to resume quantitative tightening. I am sticking with
it at the moment; but it will change if Kevin gets his way.
I would also note that if Warsh is successful in
redirecting monetary policy, he could have an impact on my ‘muddle through’ scenario
depending on how aggressive that policy is pursued.
US
International
December Japanese
YoY average cash earnings rose 2.4% versus consensus of +1.0%.
Other
Inside the recent JOLTS report.
The economic week ahead.
ECONOMIC
WEEK AHEAD: February 9-13
Fiscal
Policy
Who are you calling PIIGS now?
https://www.ft.com/content/4f827a4e-13a2-4db6-b47d-daa58f1be561
Unmasking billions in hospice fraud.
Kevin
Warsh
What Warsh needs to do.
https://www.foxnews.com/opinion/kevin-warsh-must-move-fast-undo-worst-fed-mistakes-decades
The
Financial System
Credit
market reality check.
Investing
AI’s potential to damage software companies.
https://www.noahpinion.blog/p/the-fall-of-the-nerds
Update
on valuations.
Bitcoin’s
slump could worsen.
Is
bitcoin digital gold or fool’s gold?
https://www.capitalspectator.com/is-bitcoin-digital-gold-or-fools-gold-the-markets-still-deciding/
The
latest from BofA.
Most
indicators linked to global growth are improving.
News on Stocks in Our Portfolios
What
I am reading today
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