Monday Morning Chartology
Value, Growth At A Reasonable Price, Dividend Investing
Seeking Alpha Analyst Since 2010
The Morning Call
1/25/21
Our daughter is undergoing chemotherapy and we will be helping her and our grandchildren. Back next Monday.
The Market
Technical
Last week, the S&P regained its very, very short term uptrend. It remains above both DMA’s and in uptrends across all timeframes. So, expansive monetary and fiscal policies continue to work their magic on equity prices and that will likely remain the case until, as or if they are terminated or an exogenous event spoils the party.
TLT last week remained in uptrends across all timeframes except the very short term trend. However, short term, it has successfully challenged both DMA’s creating some momentum to the downside and keeping alive the notion that bond investors are getting seriously concerned about inflation. As a result, I continue to watch this indicator very closely.
Gold’s chart looks remarkably like TLT’s. Short term, it has confirmed the break below its 100 DMA though it did fail to successfully challenge its 200 DMA last week. Nonetheless, like TLT on a long term basis, it remains in uptrends across all timeframes. So, like TLT, I would leave long term positions intact but pay close attention to any further downward move.
The chart of the dollar is similar to those of TLT and GLD in that short term, it is in a solid downtrend. The difference is that UUP has done extensive longer term damage to its technical picture. That it remains in an intermediate term trading range is about the most positive thing one could say about its chart.
Bottom line. Equity investors continue to respond positively to a very easy monetary policy. Though bond, gold and dollar investors appear to be experiencing some cognitive dissonance. Historically, a dichotomy of this kind doesn’t last, suggesting caution.
Friday in the charts.
Biden's Big Week Buoys Big-Tech & Bullion, Batters Bitcoin & Black Gold
Global markets technical condition improving.
Worldwide stock markets ease out of corrections
Fundamental
Headlines
The Economy
Review of the Week
The US datapoints last week were overwhelmingly positive, including the primary indicators (two plus, zero minus). So, I rate the week a positive. This is something of an outlier versus the recent trend in the dataflow which has been a slow struggle to advance. Whether last week’s numbers are indeed an outlier or a sign of things to come is unknowable at present; but it is clearly brings hope of stronger improvement.
Overseas, the stats were negative.
https://www.markiteconomics.com/Public/Home/PressRelease/2845534afc634251aaaf93f3acfd1a7e
https://www.markiteconomics.com/Public/Home/PressRelease/abc307a6d9444e1891ef38fd50617f10
The most important nonstatistical development was Yellen’s testimony before the senate in her confirmation hearing in which she said that fiscal policy should ‘go big’ meaning to hell with the national debt to hell with budget deficit, spend, spend, spend. Unfortunately, if that policy is accurately reflected in Biden’s new stimulus bill, then little of that spending is for productivity enhancing infrastructure program. It is mostly transfer payments. As you might guess, I believe the significance of such a policy is that it exacerbates the problem of diminishing the country’s level of productivity which, in turns, lessens the long term secular economic growth rate.
In addition, if this massive unproductive fiscal stimulus is accompanied by a wildly expansive monetary policy (which it is) the risk of higher inflation is heightened. And as I have mentioned before that risk seems to be manifesting itself in the pin action of the dollar and the long bond. If those trends continue then sooner or later (1) the Fed will have to taper and/or (2) the aforementioned anxiety engulfs the equity market and the jig is up.
Another great must read from Jeffrey Snider.
They Can't See the Dire Economic Situation For What It Really Is
For the moment, our base economic scenario remains intact---the US and global economies are improving but not at the velocity of the initial sharp rebound off the bottom. In other words, a diminishing probability of a ‘V’ shaped recovery which would lessen any potential inflationary pressures and leave the Fed free to continue QEInfinity.
Longer term, my belief is that the economy will grow at a historically subpar secular rate due to the twin burdens of egregiously irresponsible fiscal and monetary policies---which continue to become even more egregiously irresponsible as a result of measures being taken by the government and the Fed in dealing with the current crisis.
US
The December Chicago national activity index came in at 52 versus its November reading of 31.
International
The January German business climate index was reported at 90.1 versus estimates of 91.8.
Other
$15/hour minimum wage would be a disaster.
Federal minimum wage of $15? - Marginal REVOLUTION
Quote of the day.
Quotation of the Day... - Cafe Hayek
Get ready of services prices to accelerate.
Get Ready For Services Prices To Accelerate Higher
Crypto vigilantes?
Exit The Bond Vigilantes, Enter The Crypto Vigilantes
Bottom line.
The latest from Jeremy Grantham
Investing Legend Sees "Spectacular" Crash In "The Next Few Months"
News on Stocks in Our Portfolios
Paychex (NASDAQ:PAYX) declares $0.62/share quarterly dividend, in line with previous.
What I am reading today
More on the fast moving extraterrestrial object.
Have We Already Been Visited by Aliens?
Quote o of the day (2)
Quotation of the Day... - Cafe Hayek
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Analyst's Disclosure: I am/we are long PAYX.
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