The Morning Call--The case for a continuing bull market

 

The Morning Call

 

6/5/24

 

The Market

         

    Technical

 

            Tuesday in the charts.

            https://www.zerohedge.com/markets/bonds-bitcoin-bid-bad-news-jolts-rate-cut-hopes-back-life

 

            Can the dollar strength last? (It is breaking down technically, suggesting it can’t)

            https://www.wsj.com/economy/the-dollar-is-at-its-strongest-since-the-1980s-canit-last-a1d407b9?mod=economy_lead_story

 

    Fundamental

 

       Headlines

 

              The Economy

 

                        US

 

Weekly mortgage applications fell 5.2% while purchase applications were off 4.0%.

 

Month to date retail chain store sales grew at a slower pace than in the prior week.

 

April job openings (JOLTS report) totaled 8.06 million versus consensus of 8.24 million.

https://www.calculatedriskblog.com/2024/06/bls-job-openings-decreased-to-81.html

 

April factory orders were up 0.7% versus projections of +0.6%; ex transportation, they were up 0.7% versus +0.4%.

 

The April ADP private payrolls report showed a 152,000 increase in jobs versus an anticipated rise of 175,000.

 

The June economic optimism index came in at 40.5 versus estimates of 45.2.

 

                        International

 

April Japanese average earnings were up 2.1% versus predictions of up 1.7%; the May services PMI was 53.8 versus 53.6; the May composite PMI was 52.5 versus 52.4.

 

The May Chinese Caixin services PMI was 54.0 versus forecasts of 52.6; the composite PMI was 54.1 versus 51.5; the May German services PMI was 54.2 versus 53.9; the May composite PMI was 52.4 versus 52.2.

 

April EU PPI was -1.0% versus expectations of -0.5%; the May services PMI was 53.2 versus 53.3; the May composite PMI was 52.8 versus 52.3.

 

May UK YoY auto sales were up 1.7% versus consensus of -2.0%; the May services PMI was 52.0, in line; the May composite PMI was 53.0 versus 52.8.

 

                        Other

 

                          April median household income.

                          https://politicalcalculations.blogspot.com/2024/06/median-household-income-in-april-2024.html

 

                          Heavy truck sales unchanged in May.

                          https://www.calculatedriskblog.com/2024/06/heavy-truck-sales-unchanged-in-may.html

 

            The Fed

 

              The Fed doesn’t know what to do (but what’s new).

              https://alhambrapartners.com/2024/06/03/weekly-market-pulse-the-feds-conundrum/?src=news

 

              Potential revisions in employment could prompt rate cuts sooner than expected.

              https://www.zerohedge.com/markets/here-unexpected-reason-why-fed-will-rush-cut-rates-soon-possible

 

            Inflation

 

              Inflation is cooling.

              https://investorplace.com/market360/2024/05/inflation-is-cooling-heres-what-this-means-for-the-fed-and-investors/

 

                Recession

 

              Latest nowcasts.

              https://econbrowser.com/archives/2024/06/nowcasts-down

 

              Eyepopping factory construction.

              https://wolfstreet.com/2024/06/03/eyepopping-factory-construction-boom-in-the-us-semiconductors-auto-industry-and-everyone-else/

 

                  Big four recession indicators.

              https://www.advisorperspectives.com/dshort/updates/2024/06/04/the-big-four-recession-indicators

 

                  Global manufacturing improved in May.

                  https://www.pmi.spglobal.com/Public/Home/PressRelease/f44f2dbe4a23430aad13cd8105306ea9

 

 

Civil Strife

 

              Government overreach.

              https://www.nakedcapitalism.com/2024/06/scott-ritter-removed-from-plane-to-russia-and-had-passport-seized-with-no-explanation.html

 

     Bottom line

 

            Buffett valuation indicator.

            https://www.advisorperspectives.com/dshort/updates/2024/06/04/buffett-valuation-indicator-may-2024

 

            Deviations from long term growth trends are back to extremes.

            Deviations From Long-Term Growth Trends Back To Extremes - RIA (realinvestmentadvice.com)

 

The case for a continuing bull market. This may be a valid argument; but bear in mind that the lower boundary of the uptrend off the 2009 low as well as the October 2022 low is at the S&P ~4400 level.

            https://www.tker.co/p/bull-market-historical-returns-duration

 

Here is another bullish forecast. What is a bit surprising about this article is that the author argues that Market rise will be driven by increasing consumer optimism (which has bottomed but is still well below levels to reflect real optimism) and faster money supply growth (which [1] is happening only because QT is shrinking and [2] he fails to mention that higher money supply growth also creates inflationary pressures).

https://paulsenperspectives.substack.com/p/the-three-horned-bull

           

            Something has got to give.

            https://www.advisorperspectives.com/commentaries/2024/06/04/somethings-gotta-give-richard-bernstein

 

            High margins should continue to support stock prices.

            https://www.ft.com/content/00b6d980-a21a-4497-9a72-6eafe9d54b95

 

            Goldman on why long rates are about to spike again.

            https://www.zerohedge.com/markets/goldman-why-long-term-yields-are-about-spike-again

 

    News on Stocks in Our Portfolios

 

What I am reading today

 

            The ten deadliest animals to humans.

            https://www.zerohedge.com/medical/these-are-10-deadliest-animals-humans

           

                        The wickedest city on earth.

            How the 'wickedest city on Earth' was sunk by an earthquake (nationalgeographic.com)

 

Visit Investing for Survival’s website (http://investingforsurvival.com/home) to learn more about our Investment Strategy, Prices Disciplines and Subscriber Service.

 

 

 

The Morning Call--Government debt and inflation

 

The Morning Call

 

6/4/24

 

The Market

         

    Technical

 

            Monday in the charts.

            https://www.zerohedge.com/markets/stocks-slide-bonds-bid-crude-crumbles

 

            Something is changing.

            https://www.zerohedge.com/the-market-ear/somethings-changing

 

            Is the Market rigged?

            https://allstarcharts.com/the-market-is-rigged/

 

    Fundamental

 

       Headlines

 

              The Economy

 

                        US

 

                          April construction spending fell 0.1% versus estimates of +0.2%.

                          https://www.calculatedriskblog.com/2024/06/construction-spending-decreased-01-in.html

 

                          The May ISM manufacturing index was 48.7 versus predictions of 49.6.

                          https://www.calculatedriskblog.com/2024/06/ism-manufacturing-index-decreased-to.html

 

                        International

 

                          The May German unemployment rates was 5.9%, in line.

 

                        Other

 

            The Fed

 

              The ECB is expected to cut rates this week.

  https://finance.yahoo.com/news/world-rate-paths-set-diverge-200000424.html?guccounter=1&guce_referrer=aHR0cHM6Ly93d3cuY2FwaXRhbHNwZWN0YXRvci5jb20v&guce_referrer_sig=AQAAAC1V8-m267svNrXbZ6ee2E6mQkGyrA4Q7dojYgQqnrqHO9YDLkSWNf-ah_BeStyoYy33b2EFYs6k_makDGOBihGtkISncoGbfaW7bMKDTOgbu1ocoWa-qnxp4sxIwERT1BYdrk6psN6yhaDfNunalirEL1l7JTt1qYhqj7QmkA4v

 

            Inflation

 

              Flash April inflation stats.

              https://econbrowser.com/archives/2024/06/instantaneous-inflation-rates-for-april

 

              Government debt and inflation.

              https://wolfstreet.com/2024/06/01/spiking-interest-payments-on-the-ballooning-us-government-debt-v-tax-receipts-and-inflation-q1-update/

 

              Inflationary perceptions.

              https://www.advisorperspectives.com/commentaries/2024/06/03/inflationary-perceptions-john-mauldin

 

              OPEC gives up on $100/barrel oil.

              https://www.bloomberg.com/opinion/articles/2024-06-03/opec-says-goodbye-to-its-100-a-barrel-oil-quest?srnd=homepage-americas&sref=loFkkPMQ

 

            Geopolitics

 

              Geopolitical risk is everywhere.

              https://www.zerohedge.com/markets/geopolitical-risk-everywhere

 

     Bottom line

 

            Lots of money on the sidelines.

            https://www.apolloacademy.com/a-puzzle-in-markets/

 

            Update on valuations.

            https://www.advisorperspectives.com/dshort/updates/2024/06/03/market-valuation-is-the-market-still-overvalued

 

            Tech valuations.

            https://www.zerohedge.com/the-market-ear/suddenly-these-2000-comparisons-are-back-vogue-again

 

    News on Stocks in Our Portfolios

 

 

 

What I am reading today

 

            Is steak a health food now?

            https://www.gq.com/story/is-steak-a-health-food-now

                       

                        Quote of the day.

            https://cafehayek.com/2024/06/bonus-quotation-of-the-day-1033.html

 

            The executive branch is a criminal enterprise.

            https://www.nakedcapitalism.com/2024/06/the-twenty-first-executive-branch-is-a-criminogenic-environment.html

 

            Inside Kevin Costner’s Horizon gamble.

            https://www.gq.com/story/kevin-costner-gq-cover-story

 

 

Visit Investing for Survival’s website (http://investingforsurvival.com/home) to learn more about our Investment Strategy, Prices Disciplines and Subscriber Service.

 

 

 

Monday Morning Chartology

 

The Morning Call

 

6/3/24

 

 

The Market

         

    Technical

 

The S&P was down on the week. But the good news is that it flirted with a challenge of both its 50 DMA and the lower boundary of a very short term uptrend and bounced hard. It remains above all DMA’s and in uptrends across all time frames. Adding to the good news is that there is little visible resistance save the upper boundaries of its intermediate term uptrend (~6800) and long term uptrend (~7100). That said, the S&P is undergoing a bit of consolidation which may not be over. But that is no reason to sell.

 

            The latest from Goldman’s trading desk.

            https://www.zerohedge.com/markets/goldman-flows-guru-bullish-technical-supply-eases-today-close

 

                        Tech goes turbulent.

            https://www.zerohedge.com/the-market-ear/teflon-tech-goes-turbulent

 

                        The momentum chase is on. What’s next?

            Momentum Chase Is On. What Happens Next? - RIA (realinvestmentadvice.com)

                       

                       

 

 

 

 

After bouncing off the very short term downtrend and the 200 DMA, the long bond faded badly. It is trying to recover above its 50 DMA with ‘trying’ being the operative word. Given that TLT remains (1) also below its 100 and 200 DMAs and (2) in downtrends across all timeframes, it will likely take a lot of work or a major exogenous surprise to fulfill investor hopes for lower rates (higher prices).

 

Bonds are stuck in a downtrend.

https://allstarcharts.com/the-bond-market-knives-come-out/

 

 

 

 

 

GLD stabilized last week and appears to be consolidating slightly above its 50 DMA. Given (1) it remains above all its DMAs and in uptrends across all timeframes except for the very short term and (2) my concern about the current irresponsible fiscal and monetary policies, I think that GLD will maintain its near in support and continue to make new highs. I still hold my GDX (gold miners ETF) trading position.

 

 

 

 

 

The dollar was flat on the week, breaking slightly below the lower boundary of its very short term uptrend but holding just under it at its 50 DMA.  I’ll give it the benefit of the doubt and count that action as a plus. However, I still think that the fundamentals suggest a lower dollar.

 

Currency stress on the horizon.

https://www.ft.com/content/8d475551-2f2f-45d0-a917-4a2fb8a52056

 

 

 

 

 

 

            Friday in the charts.

            https://www.zerohedge.com/markets/rate-cut-hopes-resurrected-hard-data-slides-stocks-gold-oil-crypto-dumped

 

    Fundamental

 

       Headlines

 

              The Economy

 

                        Week in review

 

Last week’s stats were mixed, the primary indictors as well (two negative, two neutral, two positive). So, the numbers continue to reflect a ‘muddle through’ economy.

https://www.capitalspectator.com/us-q1-gdp-revised-down-but-q2-nowcasts-suggest-growth-will-pick-up/

 

The inflation data was largely expected though the core PCE was slightly lower than anticipated. Nonetheless, I still believe that inflation is as good as its going to get absent a more fiscally responsible congress and less compliant Fed. Clearly, I don’t believe the ‘higher for longer’ storyline the Fed is trying to sell.

https://www.nytimes.com/2024/05/31/business/eurozone-inflation-may.html

 

Bottom line:

 

(1)   as long as the government pursues its current spend, spend policy, I don’t see us making any further progress in lowering the inflation rate. Indeed, I don’t think that the Fed has any choice but to continue monetizing the government IOUs.

https://www.cato.org/blog/will-economic-growth-be-short-lived-fiscal-challenges-abound

 

(2)   the economy seems to be returning to its pre-covid sluggish growth path---the result primarily of the ‘crowding out’ effects of irresponsible government spending/financing.

                                                               

                        US

 

                        International

 

The May German manufacturing PMI was 45.4, in line; the May EU manufacturing PMI was 473 versus 47.4; the May UK manufacturing PMI was 51.2 versus 51.3.

 

                        Other

 

            The Fed

 

What the Fed says. The problem with this analysis is that the Fed manages to often seemingly find a way not to do what it said it was going to do.

https://www.apolloacademy.com/quantifying-fed-sentiment/

 

            Fiscal Policy

 

              First, agree on the facts.

              https://thehill.com/opinion/4693176-mulvaney-until-we-agree-on-some-basic-facts-addressing-the-national-debt-will-be-tough/

 

                Recession

 

              Recession Alert: weekly leading economic index.

              https://www.advisorperspectives.com/dshort/updates/2024/05/31/recession-weekly-leading-economic-index

 

                  Big four recession indictors.

              https://www.advisorperspectives.com/dshort/updates/2024/05/31/personal-income-economic-indicators-flat-april-2024

 

                Geopolitics

 

              Hell bent on provoking Russia.

              https://www.zerohedge.com/geopolitical/escobar-west-hell-bent-provoking-russia-hot-war

 

    Bottom line

 

            The latest from BofA.

            https://www.zerohedge.com/markets/hartnett-where-we-are-seeing-signs-impending-debt-crunch

 

    News on Stocks in Our Portfolios

 

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.