The Morning Call--The economy faces multiple challenges in Q4

The Morning Call

 

9/26/23

 

The Market

         

    Technical

 

            Monday in the charts.

            https://www.zerohedge.com/markets/bonds-bullion-dumped-dollar-jumps-shutdown-student-loan-cliff-loom

 

Note: despite what appeared to be a relative quiet day, a lot was happening---(1) the S&P 100 DMA reset to resistance, (2) the dollar close right on the upper boundary of its short-term uptrend and (3) the long Treasury closed within a dollar of the lower boundary of its long-term trading range.  So, are we going to start breaking major support/resistance levels or bounce?  Stay tuned and be careful.

 

            What if.

            https://www.zerohedge.com/the-market-ear/what-if-chart

           

            Hedge funds are shorting aggressively.

            https://www.zerohedge.com/markets/last-time-hedge-funds-were-shorting-heavily-stocks-exploded-higher

 

    Fundamental

 

       Headlines

 

              The Economy

 

                        US

 

Month to date retail chain store sales grew slightly faster than in the prior week.

 

                          August building permits were up 6.8% versus predictions of +6.9%.

 

The September Dallas Fed manufacturing index was reported at -18.1 versus expectations of -10.0.

                          https://www.advisorperspectives.com/dshort/updates/2023/09/25/dallas-fed-manufacturing-business-conditions-continue-to-worsen-in-september

 

                        International

 

                        Other

                            

                          The US has a labor shortage crisis.

                           https://www.wsj.com/economy/jobs/labor-supply-economy-jobs-charts-3285a5b7?mod=hp_lead_pos9

 

                          Update on four high frequency economic indicators.

                          https://www.calculatedriskblog.com/2023/09/update-on-four-high-frequency-indicators.html

 

            The Fed

 

              Fed projections are useless.

              Fed Projections Are Useless - RIA (realinvestmentadvice.com)

 

              The foolishness of the ‘soft landing’ narrative.

              https://www.forbes.com/sites/johntamny/2023/09/24/the-boundless-foolishness-underlying-soft-landing-mythology/?sh=743a73704ab9

 

                          Why some traders aren’t buying ‘higher for longer’.

  https://www.reuters.com/markets/us/why-traders-arent-buying-feds-higher-for-longer-vision-2023-09-25/?utm_campaign=What%20I%20Am%20Reading&utm_medium=email&_hsmi=275638659&_hsenc=p2ANqtz-8LNg37K-Lzec7DBVxGuZpPJHXLdw6qS_YSnxsDp96FHE9StSy2ANDPW5xzd-y_cmcibDP6ljCTHX3StVoTBqVAezlZcA&utm_content=275638659&utm_source=hs_email

 

 

                        Fiscal Policy

 

              The distorted priorities of our ruling class.

              https://www.zerohedge.com/geopolitical/us-keep-paying-salaries-tens-thousands-ukrainians-during-government-shutdown

 

                       

            Inflation

 

              It’s inflation, stupid.

  https://www.wsj.com/articles/inflation-will-continue-until-morale-improves-consumer-sentiment-economy-f6cb5502?mod=hp_opin_pos_5&utm_campaign=What%20I%20Am%20Reading&utm_medium=email&_hsmi=275638659&_hsenc=p2ANqtz-9ku3UyJ5VGTQkV2OlKV-Cwu910jc1iK8Q11MbEH2577Uwsq5zVEFhwTX4n0KFl8fuTaEREDb80JttKR1qjjE3MmClZwQ&utm_content=275638659&utm_source=hs_email#cxrecs_s

 

 

                        Recession

 

              The US economy faces multiple challenges in Q4.

              https://www.wsj.com/economy/u-s-economy-could-withstand-one-shock-but-four-at-once-8312ba51

 

                        Government Shutdown

 

              Congress stares down shutdown deadline.

              https://thehill.com/homenews/house/4221267-congress-stares-down-shutdown-deadline/

 

                          And so far, no one is giving an inch.

              https://www.zerohedge.com/political/gaetz-welcomes-few-days-government-shutdown-stave-americas-financial-ruin

 

                        The coronavirus

 

             Vaccination offers no meaningful protection against long covid.

              https://www.zerohedge.com/covid-19/vaccination-offers-no-meaningful-protection-against-long-covid-study

 

 

     Bottom line

 

            The AI boom has not gone bust.

            https://investorplace.com/hypergrowthinvesting/2023/09/why-the-profitable-ai-boom-has-not-gone-bust/

 

            Proper diversification.

            https://disciplinefunds.com/2023/09/22/should-you-t-bill-and-chill/

 

            Who will buy all those Treasuries?

            https://www.ft.com/content/8001a166-b02e-4d33-88a8-54a0553edf02

 

            Bill Gross on bonds.

            https://www.advisorperspectives.com/commentaries/2023/09/25/call-me-ken-gross

 

            The latest rom Morgan Stanley.

            https://www.zerohedge.com/markets/mike-wilson-consumer-falling-cliff

 

    News on Stocks in Our Portfolios

 

 

 

What I am reading today

 

            Personal hygiene in colonial America.

https://www.pinkpossible.com/trending/colonial-america-syn/?utm_campaign=VV%3E14%20Colonial%20Hygiene%20Nurith2206%20En%20-%20Display%20USA%20GAQ&utm_source=AdWords&utm_medium=townhall.com&network_code=CBQ&gclid=CjwKCAjw38SoBhB6EiwA8EQVLgZ5z7GJ7RiWAGweFNdrSmC1HnzE79KgM0jwVmBxOP9nC5ZgZn2LlBoCCzgQAvD_BwE

 

           

 

 

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Monday Morning Chartology---BofA sees more downside

 

The Morning Call

 

9/25/23

 

The Market

         

    Technical

 

The FOMC appears to have lifted the veil of investor confusion that has existed since mid-July when, in its meeting last week, it went hard on the ‘higher of longer’ scenario. As a result, the S&P (1) reset its 50 DMA from support to resistance, (2) is now challenging its 100 DMA; if it closes there today, it will reset from support to resistance, (3) made a new lower low and (4) made a huge gap down open on Thursday which it tried and failed to fill on Friday. 

 

The only good short-term news in that performance is that the gap down open still has to be filled. That said, unless the S&P can close back above its 100 DMA today, we need to start worrying about just how bad things could get. As I noted on Friday, the next visible support levels are (1) the lower boundary of its short-term trend [~4248] and (2) its 200 DMA [~4190].

 

Goldman says pain trade is now to the upside.

https://www.zerohedge.com/markets/surge-short-selling-has-goldman-prime-predicting-imminent-painful-squeeze

 

From ‘sad September’ to ‘optimistic October.’

https://www.zerohedge.com/the-market-ear/sad-september-optimistic-october

 

 

 

As you can see, the long bond made an equally impressive gap down open on Thursday---making an ugly chart just that much worse and leaving TLT near the lower boundary of its long-term trading range (~88.03). If that support level fails, then the chart goes from ugly to frightening and I will sell and take a licking on that small TLT position I initiated several weeks ago. Again, the only good news is that gap down open needs to be filled.

 

 

 

 

 

GLD had another flat week, though it also enjoyed the volatility experienced by stocks and bonds. While it managed to close the two gap opens from the prior week, it then created a brand new one on Thursday. It also failed to confirm a break of its 50 DMA to the upside as well as a break of its 200 DMA to the downside. Clearly, gold investors are having a tougher time deciding what ‘higher for longer;’ though historically, higher interest rates (lower bond prices) and a strengthening dollar (see below) have both been negatives for gold. So, color me confused on this chart.

 

 

 

The dollar continued its two-month sizz to the upside, seemingly unperturbed by the schizophrenic trading in other sectors. As you can see, it continues to inch closer to 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/higher-longer-reality-check-wrecks-bonds-banks-big-tech

 

 

Three more charts to watch.

https://www.zerohedge.com/the-market-ear/3-charts-we-are-watching-huge-levels-make-or-break

 

    Fundamental

 

       Headlines

 

              The Economy

                         

                        Last Week Review

 

It was another relatively slow week for US data. What there was was negative though the primary indicators were balanced (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.

                         

The main event of the week was the FOMC meeting in which it left rates unchanged but moved its ‘dot plot’ to a more hawkish stance. I will leave you to interpret that action as you want. Mine is that until the Fed proves it is operating on anything other the WAG (wild ass guess) method, assuming you know what the Fed is going to do is a fool’s bet.

 

Dots: stabs in the dark without any substance.

https://www.realclearmarkets.com/articles/2023/09/22/dots_stabs_in_the_dark_without_any_substance_981257.html

 

What the Fed is overlooking.

https://scottgrannis.blogspot.com/2023/09/what-fed-is-overlooking.html

 

So, there is really no reason to alter my recession forecast. My conviction remains weak and the last couple of weeks haven’t helped. I am also maintaining my position that the Fed loosens at the first sign of trouble.

 

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%.

"That 70s Show" - RIA (realinvestmentadvice.com)

 

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.

                                              

              The Economy

 

                        US

                                          

The August Chicago national activity index was -.16 versus estimates of +.15.

                                                         

 

                        International

 

The September German business climate index came in at 85.7 versus consensus of 85.2; the September current conditions index was 88.7 versus 88.0.

 

                       Other

 

                 Recession  

 

                   Pray and delay is back as debt costs soar.

                   https://www.semafor.com/article/09/21/2023/pray-and-delay-is-back-as-debt-costs-soar

 

                        Recession alert leading economic index.

                   https://www.advisorperspectives.com/dshort/updates/2023/09/22/recessionalert-weekly-leading-economic-index

 

                  Government Shutdown

 

                 Inching toward a shutdown.         

                 https://apnews.com/article/government-shutdown-mccarthy-house-republicans-spending-cuts-deff84c0e2ff7d3bd076b8c38e14cca4

 

             Geopolitics

 

               The shifting Ukraine narrative.

               https://www.zerohedge.com/geopolitical/seymour-hersh-mainstreams-ukraine-narrative-shift

 

                  China

 

                The Chinese are practicing.

    https://www.wsj.com/world/asia/chinas-fighter-jets-arent-just-flying-around-taiwan-theyre-practicing-d6e56cc5?mod=hp_lead_pos9&utm_campaign=What%20I%20Am%20Reading&utm_medium=email&_hsmi=275234538&_hsenc=p2ANqtz-9Lc4d0MQKCQEIcOe-j2fgny3kJuSzp-5bYn1XW5AELBuOm1aDEQpbN_4LRxWAFaYpozbJ9A_2hccSQDT0mmXQkTqEwhw&utm_content=275234538&utm_source=hs_email

 

 

      Bottom line

 

            BofA thinks that there is still more downside.

            https://www.zerohedge.com/markets/hartnett-did-you-sell-last-hike

 

 

      News on Stocks in Our Portfolios

 

 

What I am reading today

 

 

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The Morning Call--The recession's start has been further delayed

 

The Morning Call

 

9/22/23

 

The Market

         

    Technical

 

            Thursday in the charts.

            https://www.zerohedge.com/markets/bond-bloodbath-trounces-tech-batters-bitcoin-banks-bullion

 

Note:  it was not a fun day in stock land.  The S&P ended the day below its 100 DMA; if it closes there on Monday, it will revert to resistance.  Were that to occur further support exists at the 200 DMA (~4235) and the lower boundary of its short-term uptrend (~4189).  That said, the S&P, the DJIA and fully 75% of all the stocks in our Universe made gap down opens---which should generate a reflexive rally to close those gaps.  Maybe not today; but likely soon.  That is not to suggest that this decline is over.  Usually, days like yesterday are not isolated events.  And remember the last two weeks of September and the first two weeks of October are seasonally the worse period for stocks on the calendar.  So, brace up.

 

The good news is that a number of stocks have been trading near their Buy Value Ranges; and a further sell-off could provide a chance to Buy.  Patience.

 

            Three more charts to watch.

            https://www.zerohedge.com/the-market-ear/3-charts-we-are-watching-make-or-break

 

    Fundamental

 

       Headlines

 

              The Economy

 

                        US

 

                          August existing home sales declined 0.7% versus the forecast of +1.5%.

                          https://www.calculatedriskblog.com/2023/09/nar-existing-home-sales-decreased-to_21.html

 

The August leading economic indicators fell 0.4% versus estimates of -0.5%.

                          https://www.advisorperspectives.com/dshort/updates/2023/09/21/leading-economic-index-conference-board-recession-fears

 

                        International

 

August Japanese CPI was +0.2% versus consensus of +0.6%; the September flash manufacturing PMI was 48.6 versus 49.9; the flash services PMI was 53.3 versus 54.0; the flash composite PMI was 51.8 versus 52.5.         

 

August UK retail sales were up 04% versus predictions of +0.5%; ex fuel, they were up 0.6%, in line; the September flash manufacturing PMI was 44.2 versus 43.0; the flash services PMI was 47.2 versus 49.2; the flash composite PMI was 46.8 versus 48.7.       

 

The September flash EU consumer confidence index was reported at -17.8 versus projections of -16.5; the September flash manufacturing PMI was 44.2 versus 43.0; the flash services PMI was 47.2 versus 49.2; the flash composite PMI was 47.1 versus 46.5.

 

The September flash German manufacturing PMI was 39.8 versus expectations of 39.5; the flash services PMI was 49.8 versus 47.2; the flash composite PMI was 46.2 versus 44.8.

 

                        Other

 

                          The slowdown in growth of median household income.

                          https://politicalcalculations.blogspot.com/2023/09/slower-growth-for-median-household.html

 

            The Fed

 

              Is the Fed ignoring signs of another financial collapse?

              https://thehill.com/opinion/finance/4212035-is-the-fed-ignoring-signs-of-another-financial-collapse/

 

  Higher for longer, maybe much longer.

  https://www.wsj.com/economy/central-banking/higher-interest-rates-not-just-for-longer-but-maybe-forever-d5891964?mod=economy_lead_story

 

            Recession

 

              The recession’s start is further delayed.

              https://econbrowser.com/archives/2023/09/ft-booth-september-survey

 

            Government Shutdown

 

              House leaders have a new plan.

              https://www.axios.com/2023/09/20/house-republicans-government-shutdown-new-plan

 

            Civil Strife

 

When authorities believe their citizens will become dangerous.  I agree with Yves, climate change will hardly be the trigger.  But that doesn’t change the analysis of what is happening now.

https://www.nakedcapitalism.com/2023/09/when-authorities-believe-their-citizens-will-become-dangerous.html

 

EU politician delivers message to the ruling class.

https://www.zerohedge.com/political/go-hell-brave-eu-politician-delivers-damning-message-global-tyrants

 

 

    News on Stocks in Our Portfolios

 

 

What I am reading today

 

What happened to civics, math, history etc.  We are educating a generation that can appreciate the finer aspects of butt f**king but can’t add or subtract.

https://www.thecollegefix.com/universities-welcome-students-back-with-queering-menstruation-anal-101-events/

 

Friday morning humor.

https://babylonbee.com/news/exclusive-babylon-bee-uncovers-why-stealth-plane-so-hard-to-find

 

 

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