The Morning Call---Wall Street's biggest bear turns bullish

 

The Morning Call

 

7/20/22

 

 

The Market

         

    Technical

 

            Tuesday in the charts.

            https://www.zerohedge.com/markets/bitcoin-brent-big-tech-bid-putin-promises-trumped-piss-poor-permits

 

Note: the S&P blew through the upper boundary of its very short term downtrend; if it closes there today, that trend will be voided. If that occurs, the next resistance levels are ~4147 (the 100 DMA) and ~4200 (the 23.6% Fibonacci retracement level).

 

            Margin debt down 9.2% in June.

            https://www.advisorperspectives.com/dshort/updates/2022/07/19/margin-debt-down-9-2-in-june

 

            Most recent 10 year Treasury ‘fair value’ estimate.

            https://www.capitalspectator.com/10-year-treasury-yield-fair-value-estimate-19-july-2022/

 

            Treasuries are pricing in a lot of confidence in the Fed.

            https://www.zerohedge.com/markets/treasuries-trapped-3-world-show-oodles-confidence-fed

 

    Fundamental

 

       Headlines

 

              The Economy

 

                        US

                            

Weekly mortgage applications fell 6.3% vehicle purchase applications were down 7.3%.

 

                        International

 

                          June German PPI was up 0.6% versus consensus of +1.3%.

 

June UK CPI was up 0.4% versus expectations of up 0.5%; core CPI was up 0.4% versus up 0.5%.

 

                        Other

 

                          The global economic shift.

                          https://www.visualcapitalist.com/shifting-global-economic-power/

 

                          Slowdown in home showings.

                          https://www.calculatedriskblog.com/2022/07/slowdown-in-showings-suggests-further.html

 

            The Fed

 

               ECB on the horns of a dilemma.

  https://www.politico.eu/article/eurozone-inflation-hits-record-high-of-8-6-percent-in-june/#:~:text=FRANKFURT%20%E2%80%94%20Eurozone%20inflation%20surged%20to,flash%20Eurostat%20data%20showed%20today

.

 

            Recession

 

              Term spreads falling.

              https://econbrowser.com/archives/2022/07/term-spreads-falling

 

            Inflation

 

              One year inflation expectations.

              https://econbrowser.com/archives/2022/07/one-year-cpi-inflation-expectations-as-of-mid-july

 

                  Goldman CEO says that inflation in deeply embedded in global economy.

              https://www.cnbc.com/2022/07/18/goldman-ceo-david-solomon-says-inflation-is-deeply-entrenched-in-the-global-economy-.html

 

            Geopolitics

 

              Russia nears gas shutdown in Europe.

              https://www.cnbc.com/2022/07/19/russia-nears-gas-shutdown-in-europe-as-germany-rejects-claims-it-cant-fulfil-contracts.html

 

But to add to the confusion surrounding the Russian pipeline, we now hear that ‘reportedly’ Russia will restart the gas flow as scheduled---they are jerking our chain.

              https://www.zerohedge.com/markets/euroipean-stocks-soar-report-russia-will-restart-nord-stream-1-thursday

 

 

            China

 

              China’s debt bomb looks ready to explode.

              https://asia.nikkei.com/Opinion/China-s-debt-bomb-looks-ready-to-explode

 

              More lockdowns in China raise fears of economic woes.

              https://www.nytimes.com/2022/07/19/world/asia/china-covid-lockdowns-economy.html

 

              Faster spreading omicron variant hits China.

              https://www.zerohedge.com/covid-19/faster-spreading-omicron-variants-hit-china-sparking-lockdown-concerns

 

     Bottom line

 

            Latest BofA survey shows full investor capitulation.

https://www.bloomberg.com/news/articles/2022-07-19/bofa-survey-shows-full-investor-capitulation-amid-dire-pessimism?srnd=premium#xj4y7vzkg&sref=loFkkPMQ

 

            And its investment strategist goes from Wall Street’s biggest to a bull.

            https://www.zerohedge.com/markets/biggest-wall-street-bear-turns-bullish-after-record-pessimism-full-investor-capitulation

 

    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.

 

 

 

The Morning Call---Earnings season off to a slow start

 

The Morning Call

 

7/19/22

 

 

The Market

         

    Technical

 

            Monday in the charts.

            https://www.zerohedge.com/markets/brent-bitcoin-and-bonds-bounce-rotten-apple-wrecks-tech

 

Note: yesterday, the S&P tried to push through the upper boundary of its very short term downtrend and failed. This keeps intact the pennant formation I have been referring to in our Monday Morning Chartology; it also means that the index has made yet another lower high.

 

            Watch for another volume thrust.

            https://allstarcharts.com/chart-of-the-day-thrust-hunting-season/

 

    Fundamental

 

       Headlines

 

              The Economy

 

                        US

 

Month to date retail chain store sales grew more rapidly than in the prior week.

 

June housing starts fell 2.0% versus expectations of +0.8%; June building permits declined 0.6% versus -1.0%.

 

                          The July housing index came in at 55 versus estimates of 65.

 

                        International

 

The May UK unemployment rate was 3.8% versus predictions of 3.9%; May YoY average earnings were up 6.2% versus +6.7%.

 

May EU YoY construction output was up 2.9% versus consensus of +3.2%; June CPI was +0.8%, in line.

 

                        Other

 

                          Housing inventory up 30% YoY.

                          https://www.calculatedriskblog.com/2022/07/housing-inventory-july-18th-update-up.html

 

                          Update on five high frequency economic indicators.

                          https://www.calculatedriskblog.com/2022/07/five-high-frequency-indicators-for_18.html

 

            The Fed

 

              A history of the Fed’s policy errors (must read).

              https://www.advisorperspectives.com/commentaries/2022/07/15/forgotten-lessons

 

            Inflation

 

              Inside the June inflation numbers.

              https://econbrowser.com/archives/2022/07/inflation-in-june

 

              The US is exporting inflation and Fed rate hikes will make it worse.

              https://www.bloomberg.com/news/articles/2022-07-18/strong-us-dollar-trade-gap-worse-inflation-globally?srnd=premium&sref=loFkkPMQ

 

            Recession

 

              Europe fears widespread economic fallout if Russian gas outage continues.

              https://www.wsj.com/articles/europe-fears-widespread-economic-fallout-if-russian-gas-outage-drags-on-11658136780

 

 

            Geopolitics

 

              The Ukraine war is not going well for the West.

              https://www.nakedcapitalism.com/2022/07/russias-campaign-in-ukraine-nearing-an-inflection-point.html

 

              So, the US ups the ante.

              https://www.zerohedge.com/geopolitical/us-signals-ukraine-it-can-use-himars-against-russian-targets-crimea

 

    Bottom line

 

            Are we headed for an earnings recession?

            https://www.morningstar.com/articles/1102461/markets-brief-are-we-headed-for-an-earnings-recession

 

            Goldman and Morgan Stanley believe that there is more downside in stocks.

https://www.bloomberg.com/news/articles/2022-07-18/morgan-stanley-s-wilson-sees-stock-losses-even-if-no- recession?srnd=premium#xj4y7vzkg&sref=loFkkPMQ

 

 

            Earnings season off to a slow start.

            https://www.wsj.com/articles/earnings-season-off-to-slow-start-clouding-the-outlook-for-stocks-11658050381?mod=hp_lead_pos1

 

            When to buy?

            https://ritholtz.com/2022/07/rally-multiple-compression-earnings-recession-double-bottom/

 

    News on Stocks in Our Portfolios

 

Johnson & Johnson press release (NYSE:JNJ): Q2 Non-GAAP EPS of $2.59 beats by $0.04.

Revenue of $24B (+3.0% Y/Y) beats by $180M.

 

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.

 

 

 

Monday Morning Chartology

 

The Morning Call

 

7/18/22

 

 

The Market

         

    Technical

           

           

The good news is that the S&P failed in its challenge of the lower boundary of its intermediate term uptrend for the third time last week. Plus, it still has a huge gap down open that needs to be filled. The bad news is that it remains (1) below both DMA’s, (2) in a short term downtrend, (3) in a very short term downtrend, (4) on Friday it made a gap up open that will likely be closed, and it (5) has yet to make a higher high. Visually you can see the developing wedge pattern formed by the  upper boundary of its very short term downtrend and the lower boundary of its intermediate term uptrend. Until that pattern is completed/resolved, patience is the word.

 

 

 

The long bond failed its third challenge of the lower boundary of its intermediate term trading range and is now rallying somewhat weakly. But as I said last week, as investor concern about recession escalates, the odds of lower bond prices diminish.

 

 

 

 

Gold prices continued to plunge in spite of a rally in bond prices. The good news (I guess) is that is nearing several support levels. Let’s see how it handles them. This is not the time to be buying.

 

 

 

 

 

            The story remains the same---up, up and away. My conclusion is unchanged: no matter how badly everyone wants the dollar to go down, as long as the globe looks at the US as the safest place to invest, the uptrend is not apt to change. As you can read below, technicians are starting to predict a top. However, in the articles on the Eurodollar further down, fundamentals are not supporting that notion.

 

            The dollar and stocks.

            https://allstarcharts.com/what-will-it-take-bear22/

 

            Beginning of the end?

            https://www.zerohedge.com/markets/beginning-end-dollars-irrepressible-rally

 

 

 

 

            Friday in the charts.

            https://www.zerohedge.com/markets/stagflation-fears-slam-stocks-commodities-fed-fears-yield-curve-collapse

 

            When bubbles fo bust.

            https://thefelderreport.com/2022/07/13/when-bubbles-go-bust/

 

    Fundamental

 

       Headlines

 

              The Economy

 

                        Review of last Week

 

The US economic data continued its dismal path; the   numbers were negative as were the primary indicators (one plus, one neutral, two minus). Overseas, the stats were mixed.                 

 

The main features of the US data were higher inflation and slower economic growth---which, of course, are the two issues that everyone is grappling with. Which is the larger problem, just how big a problem is it and how will it impact the economy/Markets?

 

As you know, I recently revised my outlook---

 

(1)   that we are at or near peak inflation. Unfortunately, we don’t know how deeply embedded that inflation is:  have all the recent exogenous events [covid, Ukraine, China] made this a temporary phenomenon or has the prolonged period and the magnitude of monetary ease created a structural problem making a return to a lower stable inflation rate and a return to the Market determining the price of risk impossible absent the application of some pretty harsh medicine from the Fed?,

 

(2)   and that we are already in or soon will be in a recession. And that raises the more important issue: how long Fed policy needs to and will remain tight. How long it needs to stay tight is dependent on the answer to the above question. How long it will stay tight depends on its courage.

 

Unfortunately, the turd in punch bowl is that the Fed does not have well documented history of courage. To be sure, Powell has been firm in his public commitment to squash inflation. And if that proves to be the case, then if inflation is deeply embedded in the economy, the resulting recession is apt to be a painful experience---certainly more so than the majority of the public narrative implies.

                             

All of that said, there is a heavy element of uncertainty in that analysis because we do not know how deeply embedded inflation is and we can’t say for sure that Powell won’t stand as tough as he says that he will.

 

      But Eurodollar spreads are telling us that deflation is the worry.

      https://www.zerohedge.com/markets/unprecedented-warning-about-leaping-frying-pan

 

      And here is why.

      https://www.zerohedge.com/markets/german-energy-giant-starts-draining-gas-storage-it-warns-insolvency-within-days

 

Which leaves the outlook for the economy and, more importantly for investors’ purposes, corporate profits murky at best. The good news is that second quarter earnings season has started though so far it has been somewhat disappointing.

 

Patience is virtue.

 

                        US

           

 

                        International

 

 

                        Other

 

                          Update on big four economic indicators.

                          https://www.advisorperspectives.com/dshort/updates/2022/07/15/the-big-four-economic-indicators-june-employment

 

          Recession

 

            Recession already here?

            https://www.zerohedge.com/markets/recession-may-already-be-here

 

         Geopolitics

 

           Gazprom reportedly declares force majeure

           https://www.zerohedge.com/energy/gazprom-declares-force-majeure-will-halt-gas-flows-germany-indefinitely

 

        China

 

          China’s economy hits a slump.

          https://www.nytimes.com/2022/07/14/business/economy/china-economy-slows.html

                            

                           

                           

    News on Stocks in Our Portfolios

       

         Qualcomm (NASDAQ:QCOM) declares $0.75/share quarterly dividend, in line with     previous.

          

What I am reading today

 

                Never bring white wine to  cookout.

            https://www.bloomberg.com/news/articles/2022-07-12/best-wine-pairings-with-grilled-food-red-rose-sparkling-for-summer-cookouts?sref=loFkkPMQ

 

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