The Morning Call
7/9/26
I am off to the beach again. I will be back 7/16.
The
Market
Technical
Wednesday in the
charts.
https://www.zerohedge.com/markets/mideast-melee-spikes-oil-batters-bonds-big-tech-bitcoin-bullion
Summary:
Words ('ceasefire is over': Trump) and deeds (tit-for-tat
attacks escalating) surrounding Iran spiked oil prices
to one-month highs, smashing bond yields higher and stocks lower early (then
big tech bounced, distracted from the chaos in momentum briefly). The dollar
ripped and dipped, with gold mirroring the swing. Bitcoin followed big-tech
lower (but not back up) as the market shrugged off hawkish confirmation in
Fed Minutes and bonds bounced back to end only marginally higher in
yield. Geopolitics is back baby... but so are the dip-buyers as stocks
decoupled from the rise in oil and bond yields...
And the almost unprecedented gap between (high) crack
spreads and crude means refiners have an incentive to buy crude and meet the
product demand...
Rate-hike expectations
rose back near post-Warsh highs today as a resurgence in crude oil prices
raises the specter of reigniting inflation. But notably, despite the
confirmation of a hawkish anti-inflation bias, rate-expectations barely moved
following the Minutes..
Wednesday 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
Note. The S&P
made a second lower high and appears ready to challenge its 50 DMA. However, it still needs to make a second lower
low before we even think about a trend reversal. That won’t happen until the S&P drops
below ~7285. Plus, gold settled on the lower boundary of its short term uptrend. Breaking below that level would clearly
indicate a change in trend.
Thursday morning
setup. Futures are higher (although off session highs), and oil erased
overnight gains as the market moved past the latest Middle-East flare up which
saw the US military strike 90 Iranian targets for a second day and Tehran
retaliated against American allies in the Persian Gulf. And like during
previous escalations, this time nobody believes it will last. As of 8:00am ET
S&P 500 futures rose 0.2% and Nasdaq 100 contracts gained 0.6% as
semiconductor stocks advanced in Asia, Europe and US premarket trading after SK
Hynix drew strong demand for its offering of ADRs. Mag7 stocks are mixed, with
META tumbling on a Reuters report the company has signed long-term contracts
for memory, networking gear and flash storage, refuting the market's
expectation that the company is starting to ease back on capex
spending. The FTSE 100 lags and is down 0.8% as AstraZeneca shares slump
9% after its Wainua drug failed to prevent heart problems. . Cyclicals,
ex-Energy, are rebounding led by Fins and Industrials. Momentum is poised for
another strong day, this time with Beta. Brent traded near $79 a barrel after
swinging between gains and losses. Bond yields are down 2bps to up 1bps as the
curve twists steeper ahead of today’s 30Y auction; the 10Y yield trades at
4.59%, near a one-month high. Commodities are weaker with Ags and Energy
selling off but there is a bid to metals led by Precious. The Bloomberg Dollar
Spot Index is also little changed. The kiwi is the strongest of the G-10
currencies, rising 0.6% against the greenback after some hawkish remarks from
RBNZ Governor Breman. Precious metals advance along with Bitcoin. Today’s
macro data focus is on jobless data and existing home sales with the macro
focus shifting to next week’s CPI / PPI, Retail Sales prints as earnings season
kicks off.
Fundamental
Headlines
The
Economy
US
Weekly initial jobless claims totaled 215,000 versus
forecasts of 218,000.
International
The May German
trade balance was +E19.1 billion versus estimates of +E14.8 billion.
June YoY Japanese
machine tool orders were up 52.8% versus projections of up 37.4%.
Other
Compiling the regional Feds’ manufacturing and
services indices.
https://bonddad.blogspot.com/2026/07/regional-fed-survey-confirm.html
Iran
Overnight news.
Monetary
Policy
The minutes from
the latest FOMC meeting were released yesterday and they reflected the hawkish
tone of the meetings press release as well as Warsh presser narrative.
https://www.zerohedge.com/markets/fomc-minutes-12
Fiscal
Policy
The Bessent Doctrine.
https://www.nytimes.com/2026/07/07/opinion/scott-bessent-trade-economy.html
In yesterday’s
Morning Call, I noted a new senate bill providing for government investment in
defense contractors. Here is the history
of the Biden’s administration’s investments in the energy industry.
And here is the current stats of current US
funded defense programs.
More on the subject: why does the private
sector need government investment
when it
already so adept at achieving success?
https://allisonschrager.substack.com/p/ceding-defeat
Inflation
Consumer inflation expectations throw Fed a
curve ball.
https://wolfstreet.com/2026/07/07/consumer-inflation-expectations-throw-the-fed-another-curveball/
Investing
Duration is
starting to matter more for stocks as yields rise.
https://www.zerohedge.com/markets/duration-starting-matter-more-stocks-yields-rise
Summary:
The rotation in the stock market is starting to favor lower versus
higher duration stocks as yields continue to rise. Change is afoot
in the market. The seemingly irrepressible rise in semis stocks has
foundered, with the shares of Micron, SanDisk, Nvidia, Broadcom et al down
15-30% from their recent highs. The new leaders are financials – insurance
and banks – and pharma and healthcare firms.
Reasons to be bullish for the rest of 2026.
https://www.carsongroup.com/insights/blog/more-reasons-to-be-bullish-the-rest-of-2026/
Update on
valuations.
https://www.advisorperspectives.com/dshort/updates/2026/07/08/buffett-valuation-indicator-june-2026
The risk in
leveraged stock ETFs.
Here is what stops
the bulls. (the author has a valid point; but his solution---lots of cash and a
big short position---is a huge nondiversified bet on a single outcome. In my opinion, he is making too big a bet on
market/stock direction. My position: sell
half your tech stocks that have more than doubled, hold the cash and if you
want to play the downside, buy a conservative position in the S&P short or
the VIX)
https://talkmarkets.com/article/heres-what-finally-stops-the-bulls-1783533097
It is important to
be deliberate when ‘doing nothing’.
https://behaviouralinvestment.com/2026/07/08/nothing-in-investing-is-doing-nothing/
News on Stocks in Our Portfolios
What
I am reading today
Thursday
morning humor.
U.S.
Back In World Cup After Trump Deports Belgian Team | Babylon Bee
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