The Morning Call
9/14/26
The
Market
Technical
Last week, the
S&P was down but not without a lot of back and forth. Tuesday through Thursday, it pushed below its
former all time and its 50 DMA on two gap down opens. On Friday, it recovered both
levels---negating any bearish effects of those two challenges on a gap up open
which filled the aforementioned gap down opens.
All in all a technically exasperating performance. On a longer
timeframe, the index remains above all DMAs and in uptrends across all time frames. Shorter term, it has now set three lower
highs and three lower lows. And Friday’s
big gap up open doesn’t make things any better.
The long term technicals suggest that this recent small correction is
just that---small. So, at this point,
there is no reason to get beared up.
That said, the fundamentals (fiscal policy, monetary policy, war, oil, tariffs)
give me the willies. So I will continue to sit on my hands.
Bond investors
certainly aren’t impressed with the fundamentals. And as you know, I think that they are a lot smarter
than the stock jockeys. TLT continues the
trade down across all timeframes and is below all three DMAs. I guess that
could change with the results from this week’s FOMC meeting. Color me skeptical. … for the long bond to rise enough to even
challenge the upper boundary of its very short term downtrend is going to take
a series of very positive developments. Unless the bond boys somehow take a rate
increase as a plus, I don’t see how that can change.
GLD had another
down week, remaining below its recently reset 200 DMA but it is still in a
short term uptrend. In addition, it challenged
its 100 DMA three times last week and managed to hold above it. I continue to have directional uncertainty
due to the fundamentals that historically drive gold prices: potentially higher
interest rates versus a love stew of the continuing inflationary pressures from
lousy fiscal policy, the economic fallout from two wars and higher tariffs. While
I am unsure of the outcome, for the moment holding on to my GDX.
The dollar ended flat on the week, holding above
its 100 DMA but remaining in a very, very short term downtrend. Short term, it seems to be biding its time waiting
for a clearer fundamental picture.
Longer term, it remains in a ‘no man’s land’. The link below says ‘watch the yen’ for a
clue.
https://www.zerohedge.com/the-market-ear/yen-supertanker-turning-why-usdjpy-150-could-break-global-markets?gift=eyJhbGciOiJIUzI1NiIsInR5cCI6IkpXVCJ9.eyJuaWQiOiIxMTI0NzMxIiwic2VuZGVyVWlkIjoiUUhnc3BaZVVFS2E3RHhXM216eFlKbjhaWEFoMiIsImlhdCI6MTc4OTE1Njk3NCwiZXhwIjoxNzkxNzQ4OTc0LCJhdWQiOiJ6aC1naWZ0In0.j0jfc_KU6fiCIRN2teLb3OrZ3TddOpU2Ch_Tjh-pvrQ
Friday in the charts.
https://www.zerohedge.com/markets/astra-aytollahs-accelerating-inflation-week-when-oil-rewrote-warshs-playbook?gift=eyJhbGciOiJIUzI1NiIsInR5cCI6IkpXVCJ9.eyJuaWQiOiIxMTI0NzMyIiwic2VuZGVyVWlkIjoiUUhnc3BaZVVFS2E3RHhXM216eFlKbjhaWEFoMiIsImlhdCI6MTc4OTE1Nzk2MiwiZXhwIjoxNzkxNzQ5OTYyLCJhdWQiOiJ6aC1naWZ0In0.C55NdmEVu26KA0jMDirLKUUfUWDg4z723MIZPV0_cyM
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
The latest from Goldman.
Monday morning
setup: US futures are sliding, dragged by fears of a possible AI development
slowdown as well as higher oil prices (Brent > 108), though bond yields are
not reacting yet (10Y yield still under 5%). As of 8:00am ET, S&P
futures are down 0.6%, and potentially facing their first down 1% day since
late July; Nasdaq futures plunging 1.5% as AI-linked stocks like chipmakers
and memory tumble in US premarket trading following a call to put the
brakes on developing cutting-edge models. Semis are down 4.7% pre-mkt,
driven by the AI pullback story though China is pushing back saying the
statements are alarmist; expect additional pushback from Trump. Software is
+1.5% but Mag7 are weaker with NVDA -3.2%, TSLA -2.1%, and META -1.2%. Staples
/ HC are bid with Discretionary / Fins mixed but slightly positive. Industrials
are also getting hit with AI theme (less data center construction). Brent is
rising and sitting close to $108/barrel on the shutdown of a Saudi
pipeline and as a meeting between Iran and Gulf nations was delayed.
That’s weighing on European bonds, mostly at the short end. UK two-year yields
are up six basis points, German two-year yields by five basis points.
Treasuries are little changed at the short end, while 10-year yields are down a
basis point. The USD is seeing its strongest day in 3 wks, rallying with
oil and the Bloomberg Dollar Spot Index is up by 0.4%, with the New Zealand
dollar and Japanese yen among the underperformers. Gold prices are sinking and
now below $4,300/oz. Commodities are mostly lower ex-Energy with WTI
approaching $104/bbl with fuel prices higher; moves are driven by Saudi closing
east/est pipeline and a delay on Iran/Gulf countries meetings to discuss Strait
of Hormuz navigation. Base metals are outperforming Precious, but both are
lower. US economic data slate empty for the session. Fed speakers remain in
external communications blackout period ahead of Sept. 15-16 FOMC meeting
Fundamental
Headlines
The
Economy
Last
week, the US stats were sparse and unfortunately quite disappointing with one
negative primary indicator and two neutral price measures. Overseas, the data was
balanced but with one neutral and three negative inflation datapoints.
The
US numbers keep alive my concerns about a weakening economy. With regards to
inflation, while the headline readings for both CPI and PPI were neutral, the
core figures were split---PPI core slightly positive, CPI core slightly negative.
That keeps my ‘good as it is going to get but not any worse’ forecast alive and
well, though the Street narrative is getting more bearish. Leaving me with an
increasing level of uncertainty.
Several
new items bear comments. One. The war in
the Middle East ramped up a notch with escalating attacks across the area---the
US and Iran striking each other while the fist fight between the Saudis and
Houthis got really serious. Aside from
this all being a giant waste on money at a time when the US budget is already
out of control, this has major inflationary implications via the price of oil.
Oil has reached an inflection
point.
https://www.zerohedge.com/markets/oil-market-has-reached-inflection-point-energy-aspects
A closer look at those inflation numbers.
https://bonddad.blogspot.com/2026/09/august-core-inflation-benign-but-energy.html
Two.
Add in Trump’s tariffs, his hare brained threat to cease doing business with
any country with which the US has a trade deficit if the Fed raises rates and
his more nonsensical proposal for a bonus check for every American adult if the
GOP wins the mid-terms and it is no wonder that I (and the Market) have
increasing concerns over inflation. (As
an aside, I don’t see how the Trump bonus could ever get passed. But it simply demonstrates the lack of fiscal
prudence of our ruling class.)
And
speaking of the foolishness of our ruling class (and I wish that I wasn’t),
Treasury Secretary Bessent challenged the bond market to a pissing contest over
long rates which (1) most likely puts the Treasury and the Fed in opposing corners
on the course of interest rates and (2) he will almost surely lose.
In
short, given an outlandish budget deficit/national debt, the price pressures
that accompany higher tariffs and rising commodity prices resulting from the Iranian
and Ukrainian conflicts, investors are now faced with the prospect of higher inflation/interest
rates brought on by poor governance and war.
Three:
I continue to stew over the health of the AI buildout. I have already
elaborated on the potential problems in earlier notes. So I won’t repeat them. What
keeps me concerned is the continuous flow of analysis questioning the viability
of the spend. To be sure, there is plenty of equally responsible analysis by
equally responsible analysts confirming the positive case for the future payoff
of the current spend rate.
My problem is that I am not smart enough to figure out which case is the
more likely outcome. So, I continue to hold positions in both the chip
manufacturers and the hyperscalers---although their performances has been such
that I have Sold Half of virtually every stock. And I am not running for the
hills in the rest of my Portfolios. That said, I have my finger on the trigger
for several holdings. And should the negative case appear the more likely outcome,
I will take some money off the table.
This
author does a pretty good job outlining the potential benefits/harm of AI. Some of his solutions fall a bit short.
https://www.nytimes.com/2026/09/10/opinion/ai-big-tech-america-politics.html?smid=url-share
Results from Goldman’s technology
conference.
https://www.zerohedge.com/technology/5-top-themes-goldmans-tech-conference
Bottom
line: doubts on the trajectory of the economy/inflation/AI buildout are
increasing---at least in my mind. Not yet enough to warrant a change in my outlook
but enough to keep me on the sidelines with my finger on the warning light
button.
US
International
July Jpanese industrial
production fell 0.2% versus estimates of +0.1%.
Other
The economy in the charts.
https://bilello.blog/2026/the-week-in-charts-9-11-26
Iran
Iranians are running out of gas (and
everything else).
Monetary
Policy
The case for no September rate hike.
The case for a September rate hike.
https://talkmarkets.com/article/sticky-us-inflation-justifies-a-fed-rate-hike-1789150258
The case for maximum uncertainty.
https://www.capitalspectator.com/are-rising-treasury-yields-part-of-warshs-inflation-strategy/
Fiscal
Policy
The 2026 fiscal year budget deficit hits $1.97
trillion.
AI
AI just hit a wall at full speed.
Investing
The latest from BofA.
News (but not a Buy recommendation) on Stocks
in Our Portfolios
Microsoft.
What
I am reading today
When is the right time to take social
security?
https://politicalcalculations.blogspot.com/2026/09/when-is-right-time-for-you-to-take.html
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