6/24/24
The Market
Technical
And the beat goes on. The S&P had another good
week, remaining 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). The bad news is (1) on the fundamental side, the economic data continued
to read recession while the FOMC message remains higher for longer and (2)
technically, [a] that gap up open from the prior Wednesday still needs to be
filled and [b] the shorts are disappearing {see below}. All in all, I am more cautious.
How low can volatility go?
https://www.lpl.com/research/blog/how-low-can-volatility-go.html
Time to care about bitcoin weakness and evaporated shorts.
https://www.zerohedge.com/the-market-ear/time-care-about-btc-weakness-and-evaporated-shorts
More on shrinking short positions.
Shrinking money market funds.
Hedge fund selling, retail buying.
https://www.zerohedge.com/the-market-ear/tech-collision-hedge-funds-selling-and-retail-buying
Bad breadth keeps getting worse.
Bad Breadth Keeps Getting Worse - RIA
(realinvestmentadvice.com)
The case for caution.
https://www.zerohedge.com/the-market-ear/case-caution
The long bond followed through on last week’s reversal,
remaining above all three DMAs. On the other hand, it is still above that huge
gap up open and within downtrends across all other timeframes. This pin action supports
(or is supported by) the growing evidence of an economic slowdown---though as I
note below, I am, at least currently, uncertain whether that means slowing to a
‘muddle through’ growth rate or to a recession. That said, there is a rising
chorus of recession calls and, hence an increasing likelihood that my original
recession call will have been the correct one.
GLD had a volatile week, failing to make a higher
high and unsuccessfully challenging its 50 DMA. The question now is will it
make a lower low which if it does will likely take it below the next visible
support level (the horizontal red line). That would set up the possibility of
completing a head and shoulders pattern---which is not a positive. I retain my
GDX position but as I noted last week, will sell it if that red line is
breached.
The dollar followed through last week’s major
reversal intraweek, resetting its 50 and 200 DMA to support and maintaining a very
short term uptrend. For the moment, that strength appears to derive from an
increasingly tumultuous international political/economic environment (see
article below)---which is not a plus for the stock market.
Behind the dollar’s strength.
https://econbrowser.com/archives/2024/06/eswar-prasad-top-dollar
Friday in the charts.
https://www.zerohedge.com/markets/crude-rips-gold-dips-crypto-slips-nvda-suffers-worst-week-2-months
Fundamental
Headlines
The Economy
Week
in review
Last week’s stats were pretty dismal. While the
overall data was balanced, the negative primary indicators outnumbered the
positives four to one (overseas stats were equally disappointing). That is the
second overwhelmingly downbeat week in a row. While not quite enough data to
warrant altering my forecast, another couple of weeks of this kind discouraging
numbers will. In short, (1) my original recession call may turn out to be
correct and (2) while I continue to believe that profligate fiscal policy and
an accommodative Fed will ultimately lead to higher inflation, a recession
could work against that scenario in the near term. And I would add that if (1)
recession is the ultimate scenario and (2) the Fed maintains its tight money policy,
then conditions could develop even worse.
At least one analyst still agrees with me.
https://www.apolloacademy.com/2024-mid-year-outlook-an-unstable-economic-equilibrium/
Bottom line:
The incoming data has put my expectations for
economic growth and inflation in disarray. I still need more information before
making any major changes to my forecast. So for the moment, it remains (1) the
economy muddles through and (2) inflation has likely seen its lows. But clearly
my confidence in that outcome is weakened.
US
International
The June German business climate index was 88.6
versus forecasts of 89.7; the June current conditions index was 88.3 versus 88.5.
The June UK industrial trends orders index was -18
versus projections of -25.
Other
Monetary Policy
Will
the Bank of England’s delay in rate cuts have an influence on Fed policy?
https://www.capitalspectator.com/what-does-the-bank-of-englands-delayed-rate-cut-imply-for-us/
This analyst wants the Fed to ease sooner. He then
advocates reforming the criteria on which the Fed sets policy---which in my
opinion is just the opposite of what needs to occur. The Fed has repeatedly
proven that it can’t get policy right when it uses two benchmarks. How much more
confusing will policy be if it were to try to satisfy four or five measures?
Fiscal Policy
We
are approaching the debt super cycle endgame.
https://www.zerohedge.com/markets/hedge-fund-cio-were-approaching-debt-super-cycle-endgame
Bottom line
More on valuations (must read)
A Fundamental Shift Higher In Valuations -
RIA (realinvestmentadvice.com)
Don’t wait for the Fed.
https://www.advisorperspectives.com/commentaries/2024/06/21/dont-wait-fed
News on Stocks in Our Portfolios
AbbVie (NYSE:ABBV) declared $1.55/share quarterly dividend, in line with previous.
What I am reading today
Why have we allowed China to purchase
land near our military bases?
Should
you rent or buy a tux?
https://politicalcalculations.blogspot.com/2024/06/should-you-rent-or-buy-tux.html
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