Monday Morning Chartology

 

The Morning Call

 

4/15/24

 

The Market

         

    Technical

 

The S&P took it on the nose last week, successfully challenging its very short term up trend and approaching a challenge of its 50 DMA. Not what you want but also not enough about which to get worried---it remains within its short, intermediate and long term uptrends and above all its DMAs. The only negative is that large gap up open below that needs to be filled. I will be paying close attention to follow through.

 

The reflation trade lives on.

https://www.zerohedge.com/markets/reflation-trade-lives-goldman-hedge-fund-honcho-outlines-framework-next-phase-game

 

            Some mega trends still intact.

            https://www.zerohedge.com/the-market-ear/tme-weekend-some-mega-trends-still-look-be-intact

 

                BofA warns of Black Monday.

            https://www.zerohedge.com/markets/bofa-warns-black-monday-cta-stop-losses-vol-control-liquidations-and-etf-unwinds-just

 

 

 

The long bond’s rough ride continued, putting in another gap down open on Wednesday. It now (1) is below all DMAs (2) has now made four lower highs and (3) is in downtrends across all time frames, suggesting that the bond boys are not buying lower rates (higher prices).

 

The bond crash continues.

https://allstarcharts.com/the-bond-crash-continues/

 

The secular trend in bond prices is breaking down.

https://www.zerohedge.com/markets/secular-trend-treasuries-breaking-down

 

 

 

 

 

GLD continued its Titan III formation, though Friday was a mixed bag---opening up strong and selling off the rest of the day to end in negative territory. Investors appear to be focused on inflation and geopolitical risks, especially in the Middle East. I am feeling ever more comfortable with a rising inflation rate scenario (see below) but who knows what those crazy f**ks in the Middle East will do.

 

I bought back my GDX (gold miners ETF); but this is a trading position and as such highly dependent on the chart and news flow.

 

Goldman, BofA and UBS see higher gold prices.

https://www.zerohedge.com/markets/pushed-central-banks-bofas-most-preferred-commodity-gold-hit-3000-2025

 

 

 

 

 

The dollar had a dramatic week up, successfully challenging its 50 and 100 DMAs and commencing a challenge of its 200 DMA as well as making two monstrous gap up opens the latter of which effectively closed that huge gap down open from last December. Clearly, there is some force behind this rally. Nonetheless I remain puzzled by the simultaneously strong GLD and UUP pin action. It is probably not a good sign.

 

Strongest week for dollar since 2022.

https://www.ft.com/content/85f87fa4-80b0-4a94-90bc-8f7e0a00c70a

 

 

 

 

 

            Friday in the charts.

            https://www.zerohedge.com/markets/oil-gold-soar-week-good-data-wrecks-rate-cut-hopes-slamming-stocks-bonds

 

    Fundamental

 

       Headlines

 

              The Economy

 

                        Week in review

 

Last week’s stats were weighted to the negative side with one primary indicator neutral and one down. Despite the headline narrative that the economy is gaining strength and lots of Fed speak reinforcing that notion, the numbers just aren’t there. On the other hand, there is little evidence of recession.

 

Indeed, this environment is reminiscent of my pre-covid forecast of a ‘muddle through’ economy. You may recall that this had been my outlook for an extended time prior to the Covid nonsense. And since the main tenant that of forecast (i.e., too much government debt usurping private capital/resources) is even worse today, it seems reasonable to me that if the economy is returning to normal, then normal would be that which existed prior to Covid. As a result, I am a short hair away from revising my outlook from recession to ‘muddle through.’

 

The inflation data last week did not make for happy investor reading with CPI coming in hotter than anticipated. That is the last straw for me. Accordingly, I am abandoning my ‘inflation in the rear view mirror’ forecast. As I noted last week, an unbelievably irresponsible fiscal policy, a historically dovish Fed (its current hawkish noises, notwithstanding) and the recent performance of commodities (gold, oil) and bitcoin have me thinking that inflation may be as good (low) as it is going to get. The question now is, how disciplined will the Fed be holding rates up in an election year.

 

Bottom line:

 

(1)   A week for changes,

 

(2)   I am giving up my inflation forecast [i.e., inflation in the rear view mirror].

 

Others haven’t given up.

https://gregmankiw.blogspot.com/2024/04/its-all-about-shelter.html

 

My primary concern remains that an easing in monetary policy will only amplify the impact of a grossly irresponsible fiscal policy which if left unresolved will ultimately push interest rates and inflation to even higher levels, risking a tighter monetary policy and impeding the economy’s ability to grow.

 

                                                        

(3)   the question of recession [what kind of landing] remains a bit murky, but I think that the economy has shown enough strength to warrant modifying my recession forecast slightly to a ‘muddle through’ scenario. I am not quite there; but another week or so of inconclusive stats and I will be.

                                

                                               

                        US

                                               

 

March retail sales were up 0.7% versus forecasts of +0.3%; ex autos, they were up 1.1% versus +0.4%.

 

The April NY Fed manufacturing index was -14.3 versus projections of -9.

 

                        International

 

                          February EU industrial production rose 0.8%, in line.

 

                        Other

 

            The Fed

 

              IMF chief warns central banks against lowering rates to soon,

              https://www.wsj.com/articles/imf-chief-warns-central-banks-against-cutting-too-soon-16033035

 

            Inflation

 

              Reflation is here.

              https://www.zerohedge.com/economics/its-official-reflation-here

 

            Recession

 

              Update on Recession Alert weekly leading economic index.

              https://www.advisorperspectives.com/dshort/updates/2024/04/12/recession-weekly-leading-economic-index

 

    Bottom line

 

            The latest from BofA.

            https://www.zerohedge.com/markets/ycc-now-inevitable-michael-hartnett-reveals-biggest-story-2020s

 

           

    News on Stocks in Our Portfolios

 

 

What I am reading today

 

 

 

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Monday Morning Chartology

 

The Morning Call

 

7/12/21

 

The Market

 

    Technical

 

Once again, massive liquidity wins the battle.  As you know, mid-week investors grew concerned about a slowing economy made possibly worse by the delta variant.  (I have covered the delta variant issue in prior posts and hopefully produced enough documentation for you to realize that while it is more contagious, it is less deadly than the mothership.  Sort of like a bad case of the flu.)  Meanwhile, the FOMC minutes were a tad more hawkish than expected.  But the ECB and the Bank of China saved the day with dovish moves.  All of which illustrates the strength of my current short term pin action premise: ‘I can’t see an end to this uptrend as long as the money keeps flowing with abundance and in the absence of any major negative exogenous event.’  Still this schizophrenic price action makes my head hurt.

 

 

The S&P hasn’t closed below its 200 DMA since June 2020.

https://www.zerohedge.com/markets/sp-hasnt-closed-below-its-200-dma-june-2020-what-does-mean-second-half

 

 

As you might expect, the long bond’s reaction to the aforementioned headlines was exactly the opposite that of equities---strength in reaction to the fear of a slowing  economy and a sell off when all that was forgotten.  In the process, it challenged its 200 DMA but fell back.  Nonetheless, TLT has still decidedly negated the prior downtrend off the August 2020 high and remains in a very short term uptrend.  Let’s see what new machinations investors can come up with this week.

https://www.nytimes.com/2021/07/08/upshot/interest-rates-inflation-us-economy-bond-market.html

 

 

 

 

GLD had a much less frenetic week that stocks and bonds.  Indeed, it calmly  advanced, partially closing that huge gap down open of three weeks ago and resetting its 100 DMA from resistance to support.    Perhaps investors were buying a hedge against the volatility in the major markets.

 

 

The dollar followed TLT’s lead last week (though more subdued), rising early on and selling toward the end.  And like TLT, momentum remained to the upside.

 

 

 

 

Friday in the charts.

https://www.zerohedge.com/markets/stocks-soar-all-time-high-bonds-bullion-and-bitcoin-bounce

 

 

    Fundamental

 

       Headlines

 

              The Economy

 

                        Review of Last Week 

 

While there wasn’t a lot of data releases last week, what there was was overwhelmingly downbeat.  So, after a one week respite in a negative trend, the stats resume their disappointing results.  Unfortunately, it adds evidence to my read on the economy: the data continues to confirm that the post Covid burst of economic activity is falling short of expectations.  As you know, the Markets started to worry about an economic slowdown last week.  Let’s see if there is any follow through.

 

The Fed and its ‘transitory’ inflation forecast remains at the center of investors’ attention.  The FOMC released the minutes from its June meeting last week. In them, the members recognized that the economy has not fully recovered, but (and this is a big ‘but’) they believe that it is improving faster than they originally expected and hence anticipate moving forward with ‘tapering’.  If they continue in that belief, it obviously would not be good for stocks.  That said, for the last decade, the Fed has used the flimsiest of excuses to keep QE running full blast.  So, if indeed the economic growth is decelerating, I suspect the ‘tapering’ talk will be put on hold.

 

The next excuse.

https://www.zerohedge.com/economics/feds-daly-warns-delta-variant-could-be-central-banks-next-excuse-delay-rate-hikes

 

The distortions created by QE.

https://www.zerohedge.com/markets/great-post-pandemic-boom-great-big-dud

 

The $64,000 question is, what impact will a continuing aggressively expansive monetary policy have on inflation.  So far, its effect has been minimal; so, there is a decent case for that scenario to continue.  On the other hand, if the primary cause of inflation is too much money chasing too few goods, then sooner or later the economy and Market will pay for  irresponsible monetary largess.  My concern is that time is now and that the risk to the (1) economy is that it continues to slow and inflation continues to rise [stagflation] and (2) Market is the loss of faith in the Fed and a subsequent mean reversion.

 

 

Overseas, the numbers were slightly positive, keeping the dataflow pattern erratic.  So, we continue to get little help on the economic growth front from the rest of globe.  However, the central banks continue to do their parts---both the ECB and the Chinese government reiterated their accommodative monetary policies last week.

 

                        China’s credit impulse has bottomed.

                        https://www.zerohedge.com/markets/chinas-credit-impulse-just-bottomed-profound-implications-global-economies-and-markets

 

Bottom line. ‘As you know my opinion is that following an initial snapback (which may already be over), the US economy will likely return to its former subpar secular growth rate, stymied by an irresponsible mix of fiscal/monetary policies.’

                        https://www.bloomberg.com/news/articles/2021-07-08/in-new-papers-economists-argue-deficits-are-like-ponzi-schemes?sref=loFkkPMQ

                           

                                US

 

                        International

 

Mau Japanese machinery orders were up 7.8% versus estimates of +2.6%; June PPI was +0.6%, in line.

 

June German PPI was +1.5% versus +1.7% recorded in May.

 

 

         News on Stocks in Our Portfolios

           

What I am reading today

           

               

                It is important to know/understand what you won---The Chinese variable interest entity is a case in point.

                https://www.ft.com/content/ceb9d46b-5795-4da1-8ac1-50ba9221ff1e

 

                Are the tax rules on ETF’s about to change?

            https://www.institutionalinvestor.com/article/b1sm63gbrgrrf1/Exposure-of-Wall-Street-s-Dirty-Little-Secret-Could-Shift-ETF-Assets-Back-to-Mutual-Funds

 

 

 

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