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Sunday, September 17, 2023

Monday Morning Chartology

The Morning Call

9/18/23

We are babysitting our granddaughter for the next two weeks which entails me getting her to school by 8AM which means I either send out the days’ Morning Call the night before or after the Market opens or get up at 5AM to get it out before the Market opens. My choice is door #1.

The Market

Technical

Confused yet? No? Well, I am. Last week, the S&P reversed itself back and forth across its 50 DMA three times, in the process setting a fourth higher low, then closing below it the very next day. On the fundamental side, the narrative went from ‘inflation in the rear-view mirror/Fed easing to avoid recession’ to ‘stagflation’ in the face of contradictory data on both accounts. Clearly, investors are having a tough time interpreting the numbers; and I can’t fault them for that.

Nonetheless, on a slightly longer-term basis, the S&P remains well above its 100 and 200 DMAs and within a short-term uptrend. Until it successfully challenges these longer-term support levels, the assumption is that the bias is to the upside. That said, the aforementioned uncertainty regarding a whole host of economic/political issues is elevated. So, I am not sure how much room to rally there is.

Inflow mania.

https://www.zerohedge.com/the-market-ear/inflow-mania

TLT had another down week, and its chart remains the ugliest of the group on a long-term basis. I have pointed out several times that the long Treasury is near a twenty-year low. As a contrary opinionist, that holds some appeal to me, which, if you remember, I acted on a couple of weeks ago, buying a small position.

GLD finished flat on the week, though it didn’t escape the volatility experienced by stocks and bonds. It managed to (1) create both a gap up and a gap down open, (2) reset its 50 DMA to resistance but (3) then couldn’t confirm a challenge of its 200DMA---which simply adds to the overall uncertainty among investors.

The dollar continued its two-month sizz to the upside. But, as you can see, it is approaching the upper boundary of its short-term uptrend which should slow its rate of advance. Let’s see how it handles that resistance. I remind you that usually a strong dollar is not a plus for stocks.

Friday in the charts.

https://www.zerohedge.com/markets/crude-pumped-10-mth-high-stagflation-scares-slam-stocks-bonds

Fundamental

Headlines

The Economy

Last Week Review

It was another relatively slow week for US data. What there was, was balanced, as were the primary indicators (one, one and one). This keeps the lack of a trend in place. We need follow through to establish a trend and dispel the current uncertainty overhanging the economy/Market. Unfortunately, we simply don’t have that right now. In short, the issues of whether or not (1) inflation is in the rear-view mirror and (2) we will get a ‘soft’ landing are not settled.

As if to put a finer point on that notion, the Market action on last Thursday suggested that investors had decided that inflation (and hence the necessity of a tight Fed) is indeed in the rear-view mirror and that the Fed will start to ease on its tight monetary policy, avoiding a recession. Then, just as suddenly, on Friday, the Market narrative did a 180 with ‘stagflation’ becoming the headline theme.

With such wild swings in sentiment, especially absent any defining economic data, ‘follow through’ becomes an extremely important aspect of investment strategy. Invest accordingly.

This analyst anticipates a Goldilocks follow through.

https://www.pringturner.com/a-soft-landing-scenario-gains-more-adherents-but-how-long-will-it-be-viable/

This analyst, not so much.

https://www.zerohedge.com/markets/truly-bonkers-albert-edwards-warns-shocking-surge-bankruptcies-beyond-all-fears

For the moment, I am sticking with my recession forecast. My conviction remains weak and last week didn’t help. I am also maintaining my position that the Fed loosens at the first sign of trouble.

https://www.advisorperspectives.com/commentaries/2023/09/15/fed-cut-rates-2024-jared-dillian

More.

https://www.wsj.com/articles/consumer-price-index-inflation-federal-reserve-jerome-powell-534add1?mod=hp_opin_pos_4&utm_campaign=What%20I%20Am%20Reading&utm_medium=email&_hsmi=274281489&_hsenc=p2ANqtz-8C5KF0y_PWkyG59YO44498Hhi6MZjBE247RGWyBLjyEQ2VszBMftQrJqcCbUTdoP4GV0goXc3QLwvU-U7X12YvG3NcKw&utm_content=274281489&utm_source=hs_email#cxrecs_s

Longer term, irrespective of how low inflation goes in the short term, irrespective of whether or not we have a recession and if so, how deep it will be, we are still faced with an economy growing at well below its historic secular rate and a base rate of inflation above 2%.

Correcting those self-inflicted wounds won’t be easy. It will take years of fiscal and monetary restraint to do so. And that would mean less fiscal stimulus and interest rates staying higher for longer than many now expect---which unfortunately is not apt to happen.

Bond Vigilantes And The Waiting For Gadot - RIA (realinvestmentadvice.com)

The Economy

International

Other

Update on big four economic indicators.

https://www.advisorperspectives.com/dshort/updates/2023/09/15/the-big-four-economic-indicators-industrial-production-increases-for-second-straight-month

The latest Q3 nowcasts.

https://www.calculatedriskblog.com/2023/09/q3-gdp-tracking-around-3.html

China

China’s economy is starting to show signs of stability.

https://www.bloomberg.com/news/articles/2023-09-15/china-s-economy-picks-up-in-august-on-travel-boom-policy-push?srnd=premium&embedded-checkout=true&sref=loFkkPMQ

Bottom line

P/E ratios are a rising concern.

P/E Ratios Are A "Rising" Concern - RIA (realinvestmentadvice.com)

News on Stocks in Our Portfolios

What I am reading today

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Friday, September 15, 2023

The Morning Call---Goldilocks?

The Morning Call

9/15/23

The Market

Technical

Thursday in the charts.

https://www.zerohedge.com/markets/stocks-yields-crypto-crude-jump-inflation-expectations-soar

Note: the S&P finished the day back above its 50 DMA (if it remains there through the close today, it will revert to support) and, in the process, set a fourth higher low (clearly a plus). On the other hand, this the third time it has crossed over the DMA in a week---suggesting investor confusion and uncertainty. That said, what is amazing is that equities had such a blow out day in the face of highly inflationary economic news. Strangely, the narrative of the day was that, the news notwithstanding, the Fed was done raising rates, the ECB was done raising rates and China lowered rates. To be sure, if the major central banks are through tightened, that would be reason enough for a lift in stock prices since it would imply the inflation has been whipped and the central banks are easing to avoid a recession (i.e., the Goldilocks story line). It is just odd that that scenario would present itself on a day in which the economic news suggested just the opposite. However, if that is what the Market is discounting, then that is what it is discounting and there is little use in fighting the tape. But before I buy into that narrative, I would like to see some follow through is stock prices and, at least, a hint that yesterday’s economic news was an outlier.

Today’s triple witch is the largest September op-ex on record.

https://www.zerohedge.com/markets/34-trillion-tomorrows-triple-witch-biggest-september-op-ex-record

Sucking fear out of the Market.

https://www.zerohedge.com/the-market-ear/fear-freefall

Fundamental

Headlines

The Economy

The September NY Fed manufacturing index came in at +1.9 versus projections of -10.0.

International

The July EU trade balance was E6.5 billion versus estimates of E20.0 billion.

August Chinese YoY industrial production was up 4.5% versus expectations of +3.3%; YoY retail sales were up 4.6% versus +3.0%; YoY fixed asset investments were up 3.2% versus +3.3%.

Other

The Fed

Despite the hot PPI number, the market is still not pricing in a rate hike next week.

https://www.capitalspectator.com/markets-still-no-fed-rate-hike-after-hot-inflation-report/

ECB hikes rates for the tenth time; though it appears that it may be the last.

https://www.zerohedge.com/economics/ecb-unexpectedly-hikes-25bps-record-400

The Chinese central bank cut rates.

https://www.zerohedge.com/markets/china-boosts-economy-second-rrr-cut-year

Fiscal Policy

The ‘green’ crowd continues to try to impose its will on unwilling Americans.

https://www.clubforgrowth.org/key-vote-alert-house-yes-on-the-preserving-choice-in-vehicle-purchases-act-h-r-1435/

Tax cuts are here to stay and so are exploding budget deficits.

https://www.wsj.com/politics/tax-cuts-budget-deficits-republicans-democrats-4f2a0d33?mod=hp_lead_pos1&utm_campaign=What%20I%20Am%20Reading&utm_medium=email&_hsmi=274097969&_hsenc=p2ANqtz-98nsuqo6xyanL1NHYmGomiAPqYWGjwvVALdVrPxAd5nHeM0qeLM926cQN49O8cNvJPB9Jutj-1Knqv1ZMNdEt5YGiS0w&utm_content=274097969&utm_source=hs_email

Recession

Mortgage demand stalls at a level not seen since 1996.

https://www.cnbc.com/2023/09/13/mortgage-demand-stalls-at-a-level-not-seen-since-1996.html?utm_campaign=What%20I%20Am%20Reading&utm_medium=email&_hsmi=274097969&_hsenc=p2ANqtz-_VYGUHUeinmFaF9Wa5Pve7PIDFXn7u2Z4BXzyg4_hxwpeM_v3-wFo9PLVrlUgtf1EwFncD6VBDRxhSBK1fJnrEHO_6tQ&utm_content=274097969&utm_source=hs_email

The bond market has never forecasted recession for this long.

https://www.bloomberg.com/news/articles/2023-09-14/the-bond-market-has-never-sounded-recession-alarms-for-this-long?srnd=premium&sref=loFkkPMQ

Three things are going to negatively impact Q4 GDP.

https://www.zerohedge.com/economics/here-are-three-things-about-slam-q4-gdp

China

Xi reprimanded by communist party elders.

https://asia.nikkei.com/Editor-s-Picks/China-up-close/Analysis-Xi-reprimanded-by-elders-at-Beidaihe-over-direction-of-nation

Peak China gloom?

https://www.reuters.com/markets/europe/peak-china-gloom-or-geopolitical-quagmire-2023-09-13/?utm_campaign=What%20I%20Am%20Reading&utm_medium=email&_hsmi=274097969&_hsenc=p2ANqtz-8DRcd4hvrBmLhpvPpjgc3ygSxkGWWrMPjHZkbFaAnHap-2e6t6TMp4W5uf-tf15cpjYghEALFmfN2nl0IS9C1BtZHDWw&utm_content=274097969&utm_source=hs_email

Bottom line

Ray Dalio says no to bonds.

https://www.bloomberg.com/news/articles/2023-09-14/ray-dalio-says-he-doesn-t-want-to-hold-bonds-cash-is-good?srnd=premium&sref=loFkkPMQ

This analyst disagrees.

https://www.ft.com/content/10deb3ad-d67c-42d4-8d4d-1b73eefa094c

Birinyi’s axioms.

https://ritholtz.com/2023/09/birinyis-axioms/

This kind of speculative activity by rookies tends to occur in the later stages of a bull market.

https://www.wsj.com/finance/stocks/options-individual-investors-risk-gambling-a97bee1a?st=y4rblsho42am2ik&reflink=desktopwebshare_permalink

News on Stocks in Our Portfolios

Kroger (NYSE:KR) declares $0.29/share quarterly dividend, in line with previous.

Williams-Sonoma (NYSE:WSM) declares $0.90/share quarterly dividend, in line with previous.

What I am reading today

Quote of the day.

https://cafehayek.com/2023/09/quotation-of-the-day-4389.html

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Tuesday, September 19, 2023

The Morning Call---US government debt hits $33 trillion

Sunday, September 17, 2023

Monday Morning Chartology

Bottom line

P/E ratios are a rising concern.

P/E Ratios Are A "Rising" Concern - RIA (realinvestmentadvice.com)

News on Stocks in Our Portfolios

Friday, September 15, 2023

The Morning Call---Goldilocks?

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