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A couple of observations around yesterday's durable goods report:
The first reminded me to never forget that human nature tends to have one seeing things in the color one's predisposition, or previous prediction, paints... I listened to one of our research providers paint those durable goods results as nothing more than "bad economic data" and "a big miss."
Well, in reality, not so much.
In last Friday's video commentary I suggested that the then selloff lacked some potential to break key technical support based on an utter lack of volume.
Well, if a lack of volume diminished the probability that last week's selloff contained sustainable downside oomf, the same so far today must therefore (for the moment) diminish the probability that today's rally contains sustainable upside oomf... Although there's a compelling case to be made for a notable technical bounce given critical support levels maintained last week.
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Attention Non-Client subscribers: Nothing in this video should be construed as investment advice. The examples expressed relate to portfolio management we perform on behalf of our clients, and, again, under no circumstances are they to be considered recommendations to the viewer.
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Attention Non-Client subscribers: Nothing in this video should be construed as investment advice. The examples expressed relate to portfolio management we perform on behalf of our clients, and, again, under no circumstances are they to be considered recommendations to the viewer.
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Mixing it up a little, we'll do last week's economic update in writing, and make it this morning's main message.
In a nutshell, our present assessment remains that go-forward odds favor recession over expansion... Question being, timing?
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Ironically, what the headlines suggest is ailing the market these past couple of weeks -- stubbornly high inflation -- is very likely to measurably abate over the coming months.
This morning's action (in response to this morning's producer prices print) serves as somewhat of a microcosm of our message in yesterday's video... Like I said:
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The Bank of Japan could, like in December, shock the world if/when they ease up on their aggressive monetary easing... Actually, it's, frankly, a will and a when, in terms of a policy shift... Suffice to say that a lot of Japanese capital sits outside Japan; repatriation of that capital would likely be disruptive:
My side of an email conversation with an interested friend over the weekend will serve as this morning's note:
In a nutshell, our proprietary macro index currently scores in the red, which denotes high recession odds near-term... Although we expect it to be mild by historical comparison... And, among other indicators, our own Equity Market Conditions Index that we developed in August of '21 -- which tracks and scores 12 key inputs, ranging from the dollar, to credit market conditions, to the US equity market's (via SP500) short and long-term technical setups, to fiscal and monetary policy and geopolitical risk (which includes our own assessment of geopolitics, plus we've retained BCA Research [the oldest research firm and among the most respected] for their ongoing geopolitical analyses) -- while having improved notably over the past month, still scores a -17, which denotes a significantly less than ideal equity market setup.
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It seems there's this popular notion that with employment as strong as it presently is, the odds of recession anytime soon have to be near zero.
Makes sense, right? Well, let's have a look (red shaded areas = past recessions) -- and note, when we're talking economics, while levels are to be considered, in our view it's direction and rate of change that really matter.
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Two public officials will be called on to address the implications of last week's shocking (shockingly strong) jobs number.
Ironically, the January employment data will be resoundingly celebrated by one, while the other will likely hem and haw all around it, characterizing it as one data point amid otherwise weakening data, and, while not entirely dismissing it, will, well, likely, dismiss its potential for moving the needle on rate hikes going forward.
Our monthly review of the 12 indicators that comprise our Equity Market Conditions Index (EMCI) paints a somewhat improving -- but still bearish -- backdrop for the US equity market.
Here's the intro to our internal January report:
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Suffice to day that I'll have much to say about this morning's blowout jobs report in this weekend's economic update (and stock market snapshot)... And, suffice to say, that -- judging by markets' initial response -- good news is indeed bad news (at present) for asset prices... In the meantime, some key highlights from our latest messaging herein:
Recall from Monday's note:
Nasdaq 100 Non-Commercial Traders Net Futures Positioning:
I.e., the bears are still sticking their necks out there -- risking getting their heads handed to them if indeed the Fed delivers a dovish message... I.e., that "huge short-covering if they come in dovish," will serve to add a not-small upside boost to stocks in that scenario...
