The Morning Call
3/16/26
I am off to the beach. Back in a
week.
The
Market
Technical
Having made a series of lower highs and lower
lows, it would appear that momentum is now to the downside with the 200 DMA
(~6604) and the 23.6% Fibonacci level (~6483) being the next visible support
levels. That said, given the raft of bad news, it is surprising that the
current downtrend isn’t more dramatic than it is. Of course, with the Iran war
seemingly being the most important factor on which investors are focused,
circumstances could change on a dime, i.e., at the whim of the Donald---at
which he is an expert. The hitch in that gitty-up is that the Iranian ruling
class appears (operative word) ready to fight to the last man; and that doesn’t
suggest a quick or easy solution. All of which makes me want to sit on my hands.
Further, I believe that the private credit
crisis could prove a much bigger negative than the Market seems to be factoring
in. So my bottom line is, let’s all hope that the 200 DMA/Fibonacci support
levels hold because it could get a lot worse. I certainly wouldn’t consider
doing anything in the absence of the S&P negating the current very short
term downtrend. On the other hand, my Buy List is growing.
Margin debt at
record highs.
https://www.apolloacademy.com/margin-debt-at-record-highs/
Record
liquidations
https://www.zerohedge.com/markets/historic-liquidation-institutions-just-sold-most-sp-futures-record
The
latest from Goldman’s desk.
https://www.zerohedge.com/markets/market-more-balanced-still-fragile-warns-top-goldman-trader
The bond market continued
its sell off last week---which is to be expected given the headlines featured
higher oil prices/inflation and potential turmoil in the financial system. TLT is now below all DMAs and in downtrends
across all major time frames. It is only the lower boundary of its very short
term trading range that offers any visible support, which I anticipate will be
challenged shortly---barring some miracle in the Middle East.
Given the spike in
oil prices (future inflation) and the strong dollar (see below), the weak pin
action in GLD is not surprising. However, it remains above all three DMAs and
in uptrends across all major timeframes. Of course, a prolonged period of
rising oil prices and dollar would likely put gold’s uptrend in jeopardy. For
the moment, I am holding my GDX; but I will sell it if gold breaks down
technically.
https://www.zerohedge.com/precious-metals/gold-may-not-be-safest-haven-goldman-futures-trader-warns
I think it unfortunate that dollar regains some strength on
bad news (war, credit crisis) as opposed to good news (strong economy, lower
inflation). But that is the scenario we got. Like every other index, its
current trend is highly dependent on the length and outcome of the war. Absent
that, the macroeconomic backdrop of the US economy (slow growth and rising
inflation) suggests a lower dollar. Further, I think any capitulation on our
part in the war with Iran (which unfortunately seems a possible if not probable
outcome) would find the dollar sliding again.
Friday in the
charts.
https://www.zerohedge.com/markets/tehran-turmoil-tanks-stocks-bonds-black-gold-bitcoin-bid
More
charts.
https://www.zerohedge.com/the-market-ear/spx-stuck-range-big-short-builds
Friday in the technical stats.
https://www.barchart.com/stocks/momentum
https://www.barchart.com/stocks/market-performance
https://www.barchart.com/stocks/sectors/rankings
https://www.barchart.com/stocks/signals/new-recommendations
Fundamental
Headlines
The
Economy
The
US stats were tilted to the positive side last week, though the primary
indicators were slightly negative (four plus, one neutral, five minus) and the
inflation measures balanced (one positive, one neutral, one negative). Overseas,
the numbers were overwhelmingly downbeat with the inflation indicators slightly
negative (one plus, one neutral, two negative).
Given
that the effects of the Iran war and the turmoil in the private credit market
have yet to manifest themselves in the economic numbers, I am putting my
forecasts for growth and inflation on hold---though clearly the longer the war
lasts and the greater the losses in private credit, the greater the impact on
the outlook.
In
the case of the Iran war, the principal variable is Trump and given his
unpredictable behavior patterns (which are not necessarily a negative), I think
it foolish to attempt to project how long this conflict will last.
Here
is the optimistic take (the operative word in this analysis is ‘temporary’).
Who
says, we won’?
https://danieldrezner.substack.com/p/im-sick-and-tired-of-all-the-winning
Whenever
the war ends, it still won’t provide clarity for Fed policy.
https://www.capitalspectator.com/the-war-may-end-soon-but-the-feds-battle-is-only-beginning/
The
fog of war and monetary policy.
https://assets.realclear.com/files/2026/03/2858_43b8b3ca-935d-41e5-a8ed-72f06f43e2df.pdf
The
private credit problem is a bit easier to analyze simply because it reflects a
continuing pattern of human behavior---the financial markets develop a new
product that mines a lucrative niche in the economy, money pours in, the financiers
leverage up and buy all the high return alternatives, but the fees are so
attractive, they start chasing higher risk, lower return projects to the point
where the entire niche blows up and takes a decent chunk of the financial
system with it.
I
have lived through two of these episodes and the only questions in my mind are
(1) how many of the private sector loans are trash and (2) how large the
exposure of the banking and insurance industries is. Of course, no one has any
idea concerning the answers to those questions. But if history repeats itself,
the outcome for the economy and the Market will not be a pleasant experience. _
US
The
March New York Fed manufacturing index came in at -0.2 versus estimates of
+3.2.
International
January/February Chinese
YoY industrial production grew 6.3% versus expectations +5.1%; January/February
YoY retail sales were up 2.8% versus +2.5%; January/February
YoY fixed asset investments were up 1.8% versus -0.4%; February unemployment
was up 5.3% versus 5.1%.
Other
Update on big four recession indicators.
Update on real disposable income.
Consumer sentiment at 2026 low.
More
on Friday’s personal income and spending data.
https://bonddad.blogspot.com/2026/03/january-personal-income-and-spending.html
The economic week
ahead.
ECONOMIC
WEEK AHEAD: March 16-20
Iran
Overnight news.
More
on the Iranian perspective on the war.
https://www.bloomberg.com/features/2026-vali-nasr-weekend-interview/?srnd=homepage-americas
How the war impacts the Gulf States.
Some costs related to escorting ships through
the Strait of Hormuz.
Oil crisis math.
Goldman hikes gold price forecast.
Inflation
Food inflation in the US.
https://wolfstreet.com/2026/03/11/food-inflation-in-america/
US inflation could likely become a much
greater issue.
https://www.zerohedge.com/markets/us-inflation-will-soon-demand-greater-market-focus
Investing
The best long term
strategy for investing in AI is to diversify.
https://www.morningstar.com/funds/best-long-term-bet-ai-economy-look-past
The latest from BofA.
https://www.zerohedge.com/markets/hartnett-wall-street-ominously-trading-2008-analog
News on Stocks in Our Portfolios
What
I am reading today
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