The Morning Call
2/8/21
The
Market
Technical
After touching (almost
to the penny) the lower boundary of its short term uptrend the prior Friday,
the S&P bounced nicely last week almost regaining its former very short
term trend line. It would appear that (1)
the Reddit crowd’s impact on the Market is less impactful than originally thought
and (2) the Fed with the new assistance of the federal government remains the
dominating Market force. I can’t bring
myself to even consider buying stocks at these valuation levels; but clearly,
that has been a losing strategy. My
consolation is that the stocks I own are going up and I sleep well.
TLT continues to trend
lower. Remember though that the March peak
was well above the upper boundary of the long bond’s long term uptrend (the
straight blue upward slopping line). Hence,
prices can drop (interest rates rise) a lot more before any serious technical damage
is done. The question is, are bond investors
discounting higher inflation or stronger economic growth (or some of both)? My answer is the former because I don’t believe
that economic growth will be as robust as current consensus. Whichever the case long term, the chart
suggests lower bond prices short term.
https://www.zerohedge.com/the-market-ear/c16pztuzay
GLD continues to
get beaten like a rented mule---blowing through its 200 DMA decisively last
week. The next visible support is the
lower boundary of its very short term uptrend and that is almost 20 points
lower. Note I said ‘very short term
uptrend’, which would not be a disaster if it were broken. In sum, technically speaking, there is
considerable potential downside from here.
How much will likely depend on the higher inflation versus stronger
growth tradeoff discussed above. However,
note that on a very, very short term basis, gold did gap down on both Tuesday
and Thursday; so, filling those would not be a surprise.
The dollar maintained
its upward bias last week, successfully challenging its short term downtrend
and resetting to a trading range. Not
surprising given the rise in interest rates and the volatility in the stock
market. Still, it has a lot of resistance
to overcome, likely making any follow through to the upside a struggle.
Bottom line. Last week, the equity market threw off its
concern over Market liquidity (a result of the Reddit short squeeze crowd), reviving its faith in the Fed’s unrelenting
pursuit of QEInfinity and the political class’s passion for throwing money at
anything that walks, talks and has one. The
remaining indicators seem to be supporting the end results of this scenario in
one way or the other.it
Friday in the
charts.
Margin
debt at record highs.
https://thefelderreport.com/2021/02/03/the-index-of-the-volume-of-speculation-blows-off/
Fundamental
Headlines
The
Economy
Review of the Week
The US datapoints
last week were overwhelmingly positive, although the primary indicators were not (two plus, one
neutral, one negative). I rate the week
a positive. This is the third week in a
row of upbeat numbers; more evidence that indicates that the worst is behind
us. Nonetheless, I do not think that it
augurs for a ‘V’ shaped recovery---just the continuation of a labored effort to
improve.
Overseas, the
stats were weighed to the plus side. Every
little bit helps, but no positive trend yet.
For the moment, our
base economic scenario remains intact---the US and global economies are
improving but not at the velocity of the initial sharp rebound off the bottom. In other words, a diminishing probability of
a ‘V’ shaped recovery which would lessen any potential inflationary pressures
and leave the Fed free to continue QEInfinity.
Longer term, my
belief is that the economy will grow at a historically subpar secular rate due
to the twin burdens of egregiously irresponsible fiscal and monetary
policies---which continue to become even more egregiously irresponsible as a
result of measures being taken by the government and the Fed in dealing with
the current crisis.
https://marginalrevolution.com/marginalrevolution/2021/02/the-anti-science-presidency-2.html
The coming surge in liquidity.
US
International
Other
Consumers paid down their credit cards for a
third straight month.
The
short squeeze
Retail may have ‘stuck
it to the suits’ in the GameStop short squeeze, but the suits also stuck it to
the suits.
https://www.zerohedge.com/markets/curious-timing-hedge-fund-made-700-million-gamestop
The shorts have left the Market.
https://sentimentrader.com/blog/shorts-have-left-the-market--4-2-2021/
The
coronavirus
Even the ‘scientists’ model shows even of coronavirus
scourge by June.
https://www.zerohedge.com/markets/even-scientist-models-now-forecast-covid-scourge-ending-summer
Bottom
line.
Q&A with David Rosenberg.
The latest funds flow in hedge funds.
Tesla buys $1.5 billion bitcoin.
https://www.zerohedge.com/markets/bitcoin-explodes-record-high-after-tesla-buys-15-billion
News on Stocks in Our Portfolios
What
I am reading today
Quote
of the day.
Quotation
of the Day... - Cafe Hayek
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Quotation
of the Day... - Cafe Hayek
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