The Morning Call
5/18/26
I somehow managed to delete all my Friday and weekend work on the addition
this morning. I tried as fast as I could to reconstruct the technical and economic
narrative as best I could. My apologies.
The
Market
Technical
There
is just no quit in this Market. The S&P was up for the week, although
Friday’s pin action hardly fits the pattern. Unless we get some downside follow
though (which the overnight news suggest is questionable), the technicals remain
‘full steam ahead’ with the S&P (1) making another new all-time high, (2)
above all three DMAs and (3) in uptrends across all timeframes. The technical question
in my mind is how long can this sprint higher last without a correction?
Clearly, the stock market is brushing off any
worries related to the destruction of the Middle East oil infrastructure and
the accompanying surge in oil prices as well as the problems in the private
credit market.
As you know, I
approached this upside move cautiously---which couldn’t have been more wrong.
Nonetheless, I am loath to chase this upswing, especially with (now) four gap up opens
sitting below. The only good news in this trading error is that a number of
stocks on my Buy List have remained within buying parameters. So with any
retreat, I can make a delayed entry.
TLT was beaten
like a rented mule on Friday, pushing below the lower boundary of its very
short term trading range (if it remains there through the close today, it will
reset to a down trend). That leaves it below all DMAs and in downtrends across
all major timeframes. With stagflation the likely result of the destruction
wrought on the oil infrastructure and a spendthrift government, I am hard
pressed to think that bond prices are going to improve markedly.
Gold plunged on
Friday. Not surprising given the shellacking that TLT took. So, it remains in a
very short term downtrend marked by the top and now three lower highs. I am
watching to see if it makes a new lower low.
The dollar rallied hard, pushing
up through its 50 and 200 DMAs (both remain resistance but the 50 DMA will
reset today and the 200 DMA on Wednesday in the absence of a retreat). In the
process it filled those three gap down opens overhead. Nonetheless, I continue
to believe that the macroeconomic backdrop of the US economy (rising inflation)
suggests a low to lower dollar.
Monday morning
setup:
Fundamental
Headlines
The
Economy
The
US stats were balanced though all else was negative: the primary indicators
(one plus, two neutral, two negative) and inflation (one neutral and one
negative). Overseas, the data was overwhelmingly negative including the price measures
(one neutral, three negative).
These
numbers are a possible signal that inflation wrought by oil prices are starting
to show up in the macro numbers. Of course, one week is hardly a trend but the
logic is there and most Street experts are already on board with higher
inflation.
On
the other hand, the economic growth in the US remains on track and with the
size of the AI spend continuing to grow it seems likely that it will remain so.
Though not so much for the rest of the globe.
Bottom
line: the economy is performing well and will likely continue to do so given
(1) US energy independence, and (2) the level of AI spend. On the other hand, I
remain firmly convinced that above average inflation is part of our
near/intermediate term future.
US
International
Other
Iran
Overnight news.
Investing
News on Stocks in Our Portfolios
What
I am reading today
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