The Morning Call--QEInfinity/Forever
The Morning Call
9/17/20
The Market
Technical
The Averages (28032, 3385) experienced a roller coaster day but closed mixed (Dow up slightly; S&P down fractionally). Short term, they (1) remain in a trend of lower highs within a trading range, (2) must still fill two gap up opens lower down and (3) have to overcome September’s negative seasonal predisposition. So, more downside would not be surprising. But lots of support exists at their 100 DMA’s (26208/3159), their 200 DMA’s (26208/3097) and the lower boundary of their short term trading ranges (18213/2991).
Longer term their charts are positive. Indeed, the Dow’s 100 DMA is now crossing cross above its 200 DMA. My current operating assumption remains that the Market’s bias is to the upside long term---until QEInfinity/Forever either comes to an end or investors conclude that it has been, is and will be an economic disaster (see below).
Gold reversed again; this time back up, continuing its recent see saw trading pattern between a series of lower highs and the July/August minor support level. In other words, consolidating. TLT was down. Like GLD, it is in a consolidating pattern marked by lower highs and higher lows. The dollar was up, but still failed to break the current short term trend of lower highs.
In short, all these indices are in some sort of consolidation phase---which is not surprising given the economic and political cross currents investors are now facing.
Wednesday in the charts.
Stocks Pump'n'Dump On Fed Financial Stability Fears
Fundamental
Headlines
The Economy
US
Weekly jobless claims rose 860,000 versus consensus of up 850,000.
860,000 Americans Filed For First-Time Jobless Benefits Last Week
August housing starts fell 5.1% versus forecasts of -5.0%; building permits declined 0.9% versus +2.5%.
Housing Starts decreased to 1.416 Million Annual Rate in August
The September housing market index came in at 78 versus estimates of 77.
NAHB Housing Market Index: "Builder Confidence Soars to an All-Time High, Lumber Risks Remain"
The September Philadelphia Fed manufacturing index was reported at 15, in line.
International
Final August EU CPI was -0.4%, in line.
Other
Update on business cycle indicators.
Business Cycle Indicators, September 15th
Brexit: snake eyes.
Brexit: Snake Eyes | naked capitalism
Europe’s economic recovery is imperiled.
Europe's Economic Revival Is Imperiled, Raising the Specter of a Grinding Downturn
OECD’s latest global 2020 GDP forecast not as negative as prior estimate.
OECD projects global GDP will collapse by 4.5% this year
The Fed
Of course, the big news event of the day was the wrap of the FOMC September meeting, its official statement and the follow up press conference with Powell. As expected, the Fed left rates unchanged and promised to continue its $120 billion/month purchases of US Treasuries and mortgage backed securities (QEInfinity/Forever) as far out as 2023. In short, it will continue its disastrous policy of enabling the mispricing and misallocation of assets---which, as you know, I believe will not end well especially for Market participants.
Powell did, however, note that fiscal stimulus was needed to keep the economic growth from faltering. And, as we all know, fiscal stimulus is now hostage to politics. What he failed to note is that the US is already up to its eyeballs in debt and that more debt will further inhibit the long term secular growth rate of the US.
Not to be repetitious, but, in my opinion, the US needs to take a page from the Swedish playbook and reopen the economy modeling that country’s policy.
Here is the official statement.
The Fed's Policy Statement Crossing Wall Street
Here is its growth, employment, inflation, etc. projections.
FOMC Projections and Press Conference
Steve Forbes on the Fed’s new inflation targeting policy.
Why Is The Fed Trying To Create Inflation? - Steve Forbes | What's Ahead | Forbes
Which is meaningless since inflation has averaged 2% for the last 18 years.
Consumer inflation has averaged 2% for 18 years
The Bank of England also met and, like the Fed, left interest rates unchanged and reiterated the promise of more QEInfinity/Forever. In a surprise move, it also noted that negative interest rates were being considered as a potential policy tool.
Pound Tumbles After BOE Said It Discussed Implementation Of Negative Rates
The coronavirus
Overnight update.
India Sees 100k Daily Cases In New Global Record; 30 Million Milestone Nears: Live Updates
The latest US coronavirus stats.
Political Calculations: Visualizing Six Months of the Coronavirus Pandemic in the United States
Never let a crisis go to waste.
The COVID Silver Linings Playbook | by Mohamed A. El-Erian - Project Syndicate
Stocks in Our Portfolios
Oracle on track for higher growth.
Oracle: On Track For Higher Growth With Operational Efficiency (NYSE:ORCL)
While ATT is not quite at my Buy level, this author thinks that it is a buy.
I'm Seeing Green: AT&T Is Flashing 'Buy Signals' (NYSE:T)What I am reading today
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