The Morning Call
3/23/26
The
Market
Technical
Not a pretty sight---four lower highs, four
lower lows, two closes below its 200 DMA (two more and it reverts to
resistance). Historically, a confirmed break of this DMA gets the technicians
nervous as a cat on a hot tin roof. And the 23.6% Fibonacci level (~6483) is a
short hair away. If that goes, then the next visible support is the 38.2%
Fibonacci retracement level. It is not hard to figure out why---the Iranian
ruling class is still in control and willing to fight to the last man and the
private credit market just keeps dishing up bad news. Doing nothing seems like
the thing to do while making my Buy List.
https://www.zerohedge.com/markets/var-shocked-how-much-higher-can-yields-rise-crashing-stocks
Seven things that have yet to break.
https://www.zerohedge.com/the-market-ear/seven-things-have-yet-break
Trump
stand down comes in the nick of time.
https://www.zerohedge.com/markets/trump-stand-down-comes-nick-time-stock-market
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 and now a more hawkish Fed. 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. It is now starting to take out support levels
(50 DMA now resistance, 100 DMA will revert tomorrow, if gold remains below its
trend line). That brown line is the UPPER boundary or its short term uptrend---so
the lots of potential for more downside. I am selling half of my GDX
position---which I hate doing because once the war is over, inflation and the
disturbance in the private market will likely bring the gold buyers back. But
it has hit a technical pain point; so I gotta do what I gotta do.
https://www.zerohedge.com/the-market-ear/safe-haven-pain-trade-golds-1000-collapse
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.
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 mixed last week but both the inflation (one minus) and the primary
indicators (one plus, two neutral, two minus) were negative. Overseas, the
numbers were overwhelmingly upbeat (a dramatic reversal from the prior week)
that included two positive inflation readings.
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.
The
private credit problem just keeps getting worse. Frankly barring a sustained
attack on the US homeland, I think it by far the more concerning of the two. We
know how the economy responses to war (Vietnam, Iraq, Afghanistan, Ukraine) and
despite some initial hiccups, all was well. We also know how it responds to
turmoil in the financial system---and it ain’t great.
Before
attempting to judge the impact of the present circumstance, we need the answer
to two questions: (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.
And
to put a cherry on top, the narrative out of the last week’s FOMC meeting was
more hawkish than anticipated.
US
The
February Chicago Fed national activity index was reported at -.11 versus
forecasts of +.27.
International
Other
The economic week ahead.
ECONOMIC
WEEK AHEAD: March 23-27
Investing
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