The Morning Call
2/5/24
The
Market
Technical
The S&P continues
its advance undaunted by a bevy of (what appeared to be) bad news---Powell’s
presser and the nonfarm payrolls number. At the moment, the only visible resistance
are the upper boundaries of its short term uptrend (~4993), its intermediate term
uptrend (~6600) and its long term uptrend (too high to even mention).
I said last week: Given
the economic/political/social issues that I believe are facing us, it is hard for
me to make a call for a dramatically higher Market. But historically, stocks don’t
make a new all-time high after a two year hiatus then suddenly roll over. So it
seems likely that they will climb the proverbial ‘wall of worry’ for some
length of time.
I see no reason to
argue with the tape. As you know, I bought a position in IWN; and despite its
poor performance last week, I continue to hold it.
On the other hand,
this is a Market phase in which many of our holdings are likely to start
trading into their Sell Half Range. When that occurs, I will act.
Still more room to run.
https://www.zerohedge.com/the-market-ear/tme-weekend-theres-room-add-more-exposure
Part
two.
https://www.zerohedge.com/the-market-ear/if-you-see-bubble-ride-it
The long bond had
a roller coaster week, (1) making two gap up opens, then closing both of them
with a gap down open, (2) successfully challenging its 50 DMA; and is in the process
of challenging its 200 DMA [if it closes above it today, it will reset to support].
In addition, just to add to the confusion, it continues to swing between
inverted and uninverted. I have often said that I thought that the bond market
was smarter than the stock market. Past week’s pin action belie that notion---unless
uncertainty is the correct position.
GLD had a volatile
but ultimately trendless last week. There is a lot of positive chatter about
gold, but until it can break above its all-time high, I see no incentive to dabble
in gold.
While
the long term uptrend remains in place, the dollar’s short term technical
picture has been wrecked. To be sure, a gap down open of the order of magnitude
shown on the chart begs to be closed. But that will likely take a long time. Expect
a lot of directionless trading over the short to intermediate term. Clearly, there has
been no directionless trading. The dollar has moved steadily from the lower
left to the upper right. However, it still has a ways to go before resetting
its 50 DMA or its short term downtrend. Its recent behavior is a bit of a
mystery to me. Generally, a strong dollar means weak equity prices; and that
hasn’t been the case. Perhaps it is just the magnetic pull of the gap down open
that is causing this.
Friday in the
charts.
https://www.zerohedge.com/markets/mega-cap-melts-moar-despite-powell-punch-face-regional-bank-rout
Three more to consider.
https://www.zerohedge.com/the-market-ear/3-charts-we-are-watching-rising-rates
Fundamental
Headlines
The
Economy
Week in review
The stats in the
US were mixed though the positive primary indicators outnumbered the negative
two to naught. This included a stunningly higher than expected nonfarm payrolls
reading. This more or less continues an infant streak of upbeat readings---which,
as I noted last week, suggest the hard landing scenario (i.e., recession) is
the least likely alternative. Meanwhile, overseas the data was overwhelmingly
to the plus side.
But there is one
caveat:
https://www.zerohedge.com/economics/inside-most-ridiculous-jobs-report-recent-history
Bottom line:
(1)
I think that the inflation risks are behind
us, at least for the short term. However, longer term, I believe that the most
important economic factor is the potential [inflationary] impact of a grossly
irresponsible fiscal policy which if left unresolved will ultimately push
interest rates and inflation to higher levels, risking a tighter monetary
policy and impeding the economy’s ability to grow.
(2) The question of
recession [what kind of landing] is gaining some visibility, in my opinion: no
recession. We still are not at the point that I am ready to alter my forecast;
but we are close. Clearly that is a more upbeat outlook for the economy.
The $64,000 question is ‘what does it mean for
equities?’ Judging by the Market’s
reaction to Powell’s comments in his FOMC presser and the nonfarm payroll
number, the news flow apparently doesn’t matter. Right now, investors appear
convinced of a ‘soft landing’ whatever the Fed or the data say. Until that
changes good news is good news and bad news is good news (for stocks).
Retirement
Savers Are Piling Into Stocks. Is That A Good Idea? - RIA
(realinvestmentadvice.com)
US
International
The
December German trade balance was E22.2 billion versus projections of E18.8
billion; the January services PMI was 47.7 versus 47.6; the January composite PMI
47.0 versus 47.1.
The
December EU PPI was -0.8%, in line; the January services PMI was 48.4, also in
line; the January composite PMI was 47.0, also in line.
The
January UK services PMI was 54.3 versus estimates of 53.8; the January
composite PMI was 52.9 versus 52.5.
The
Fed
Powell reinforces hawkish Fed stance on ’60 Minutes’.
https://www.zerohedge.com/markets/powell-tells-60-minutes-fed-not-likely-cut-march
Waiting for rate cuts.
https://www.ft.com/content/5c24ea81-c480-45b7-8e28-e33564b62eaf
Fiscal
Policy
The senate does what it does best---screw Americans.
Inflation
What is the right level of inflation?
https://klementoninvesting.substack.com/p/whats-the-right-level-of-inflation
The
Financial system
Bank liquidity shrinking.
https://www.zerohedge.com/markets/bank
Bottom line.
The stock market
is leading the economy a little too much.
Stock
Markets Are Leading The Economy A Little Too Much - RIA
(realinvestmentadvice.com)
Markets believe
Powell is a paper tiger.
More on valuation.
And still more.
Extending time
horizons is critical to building wealth.
News on Stocks in Our Portfolios
McDonald press release (NYSE:MCD): Q4 Non-GAAP EPS of
$2.95 beats by
$0.12.
Revenue
of $6.41B (+8.1% Y/Y) misses by
$40M.
What
I am reading today
Visit Investing
for Survival’s website (http://investingforsurvival.com/home)
to learn more about our Investment Strategy, Prices Disciplines and Subscriber
Service.
