The Morning Call
1/10/22
The
Market
Technical
As
you can see, the S&P didn’t have a particularly good week, especially since
it has just reset its short term trend to up. I mentioned the possibility of a
false breakout in last week’s Monday Morning Chartology. Given the lack of
follow through, that scenario remains on the table. Nonetheless, the S&P is
within uptrends across all timeframes and above both DMA’s. So, my assumption
has to be that the direction is up; although the S&P is approaching the
lower boundary of its newly reset uptrend and it will be important for that
level to hold.
The long bond got monkey
hammered last week on the wings of the unexpectedly hawkish FOMC minutes. It
reset both DMAs to resistance and cut through the uptrends off the March and
October lows like a hot knife through butter. There are two possible explanations
for this kind of pin action: (1) the economy will stay stronger for longer requiring
a tighter, more enduring monetary policy
than originally assumed or (2) as Scott Grannis hypothesizes below the demand
for money will decline dramatically, pushing consumers to demand more goods
than supply can satisfy, thus driving up prices. If the former alternative manifests
itself, then my thesis that ‘Powell waited too late to get hawkish and
now the Fed will be tightening into a weaker economy---thereby making it even
weaker.’ will be wrong. Having said all that, one week does not a trend make. So,
stay tuned for follow through.
The case for higher inflation.
http://scottgrannis.blogspot.com/2022/01/the-fed-is-ignoring-demand-for-money.html
GLD also had a disappointing week, though not to the extent of equites and bonds. While down, it attempted a challenge of its 100 DMA and failed. On the other hand, it is mid-challenge of its 200 DMA; I await the outcome. Meanwhile, it remained within the narrowing pennant formation [two straight red lines]---the technical assumption being that until it breaks out of that formation, it will be directionless.
The dollar continued
its drift lower but remains solidly in its short term uptrend and above both
DMA’s, suggesting that whatever the economic scenario, investors are reasonably
confident that the US economy will perform well versus the rest of the world.
Friday in the
charts.
https://www.zerohedge.com/markets/nasdaq-100-suffers-worst-start-year-2000-rates-risk-parity-routed
Fundamental
Headlines
The
Economy
Review of last Week
US data was
negative last week, though the primary indicators were evenly matched. Overseas
the stats were positive for a change but that does not change their negative
drift. So, there is still little evidence of any explosive growth in either the
US or global economies.
Of course, the big
news last week was the more hawkish than expected tone to the December FOMC
minutes---which fit nicely with my overall outlook. That remains unchanged---the
economy is struggling to grow, hampered by irresponsible monetary and fiscal
policies, getting no support from the global economy and threatened by (1) seemingly
mounting inflationary forces and (2) a more severe than anticipated retreat in
economic activity---the result of the Fed that likely waited too long to start
tightening.
The case for why
the Fed will blink.
US
International
The November EU
unemployment rate was 7.2%, in line.
Other
Inflation
Edible oil prices hit
record high.
Rents are increasing sharply.
https://www.calculatedriskblog.com/2022/01/rents-still-increasing-sharply-year.html
The coronavirus
Omicron variant less deadly than seasonal flu.
Bottom line.
Great must read
interview with Louis-Vincent Gave.
https://themarket.ch/interview/louis-gave-a-hawkish-fed-could-provoke-an-equity-crash-ld.5727
News on Stocks in Our Portfolios
What
I am reading today
Quote
of the day.
Eight
degrees of stupidity.
https://www.zerohedge.com/political/eight-degrees-ignorance-and-stupidity
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