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THE US MARKETS TAKE TWO SHORTENED WEEKS A YEAR - THANKSGIVING & CHRISTMAS -- WE DO ALSO!

*** HAPPY THANKSGIVING AND SEE YOU IN A WEEK! ***

UnderTheLens - December Video - This Wednesday PM 12/04/24

Next Release - The Mid-Week Report Thursday AM 12/05/24

WHAT YOU NEED TO KNOW!

THE FED IS TRAPPED - AGAIN!

It wasn't that long ago that the Fed remained on the sidelines while Inflation raged, explaining that Inflation was only Transitory. We all know how that turned out.

Well the Fed is clearly again in a position of their own doing as they appear to be between a "rock and hard place"! With The Fed funds rate still at 4.75% and the trajectory of cuts rapidly diminishing, US financial conditions are basically as 'loose' as they were before the Fed rate-hiking cycle started. (Don't tell me the Fed isn't political).

How do you fight Inflation this way??

RESEARCH

1- TRUMP TARIFFS & TRADE WARS

• Though Tariffs are paid by importers, studies show that doesn't necessarily translate into direct consumer price inflation.
• Trump believes that the US Consumer is the winning Trump Card. Without it China and other export lead mercantilist nations are seriously jeopardized.
• The Trump Card is the strategic play to start a manufacturing reshoring shift back to the US.
• This shift will result in jobs, tax revenues and potentially ignite a revitalized US Investment and Re-Privatization paradigm.
• This is a big gamble by the new Trump Administration, but they view the current mercantilist driven debt path as being an existential threat to US' survival.

2- TARIFFS, MERCHANDISING & "BIG 6" MARGINS

• TARIFFS: The word “tariff” and its derivatives appeared in more earnings call transcripts in the latest quarter at 1,969 globally. This is higher than at any time since the eve of the pandemic in the first quarter of 2020. This is far below the peak of more than 6,000 CEOs who wanted to talk about tariffs in the third quarter of 2019, when the Trump 1.0 measures were having their effect. So companies are not fully prepared for another trade war.
• AFFORDABILITY: What the Q3 earnings calls pointed out is that consumer-facing companies remain very worried about making their products affordable for customers. By Goldman’s count, mentions of "affordability" in earnings calls have reached a new high in Q3.
• PROFIT: Company profits are acting as a great protector against disappointing economic growth.
• MARGINS: Margins appear to be the Mag-7 real secret sauce. While profit margins accounted for 12.3 percentage points or roughly half of the Big Six’s 24.5% earnings growth. High-margin companies receive a far higher valuation than they have historically, some 2.5 standard deviations above the 35-year norm. As these companies are continuing to surprise on the upside and widen their margins, the money invested in them so far has been well rewarded.

It’s a little hard to imagine this continuing!

DEVELOPMENTS TO WATCH



THE PLIGHT OF OUR FARMERS & US AGRICULTURE CONTINUES TO GO UNREPORTED!

• PRICE DECLINES: Price declines have been especially acute for corn and soybeans, two staples of the Midwest agriculture sector.
• The most recent USDA forecast expects net cash farm income to slip by 7.2% in 2024, driven by a 27.7% decline in crop cash receipts. 
• If realized, net farm income would fall more than 25% below its recent peak in 2022.
• SUSTAINABLE PRODUCTIVITY INCREASES:  Real farm output, which includes crop production, animal production and aquaculture, rose 24% in Q2-2024 over the same quarter in 2019. 
• Farm output is currently at its highest recorded level since at least 1997, a testament to the resilience of the nation’s farmers and ranchers.
• GLOBAL DEMAND: Global appetite for U.S. agricultural products may lessen if the dollar appreciates against other currencies (like we currently expect).
• TARIFFS: The increased likelihood of higher tariffs on U.S. imports under the Trump Administration may result in retaliatory tariffs from our trading partners, putting agricultural exports at risk.

UNITED NATIONS COP29 IS "DEADER THAN A DOORNAIL!"



COP29: "Ministers told to ‘cut theatrics’, ‘move faster’ and ‘get down to business’

amid growing frustration at slow progress" -- The Guardian

• “Cut the theatrics,” UN climate chief Simon Steele told country representatives in Baku, after talks over the key issue of climate finance stalled, with developing countries insisting they need over $1tn a year and richer nations balking at the cost.
• There was a lot of frustration at COP29, with progress on a climate finance agreement very slow.  Shirley Matheson, WWF global NDC enhancement lead, said: “There’s a lot of frustration in the room. There’s a lot of anxiety. There’s a need for parties to really get together and work through this."
• The internationally agreed goal to keep the world’s temperature rise below 1.5C is now “Deader than a Doornail”, climate scientists have said. Three of the five leading research groups monitoring global temperatures consider 2024 on track to be at least 1.5C (2.7F) hotter than pre-industrial times.

GLOBAL ECONOMIC REPORTING

HOUSING STARTS / BUILDING PERMITS

• Privately-owned US Housing Starts fell by 3.1% in October from prior 1.353mln to 1.311mln, beneath the 1.33mln forecast. 
• Single-family housing starts in October fell 6.9% to 970,000. 
• Privately owned building permits declined by 0.6% from 1.425mln to 1.416mln, beneath the 1.43mln forecast. 

EMPLOYMENT - THE MESSAGE IN JOB SWITCHERS & QUITS

• The “switcher’s premium” hit an all-time high in 2022 as the Great Resignation put negotiating power emphatically in the hands of employees. That’s declined; it’s now lower than the norm for the last quarter-century, and earlier this year even went negative.
• The JOLTS is now back below its norm with the quit rate now where it was in early 2008, when the economy was beginning to weaken alarmingly. This is further evidence that workers are finding that the labor market is turning against them 

In this week's "Current Market Perspectives", we focus on the signals that Sentiment, Fundamentals and various market Segments (Credit, Bond and Equity) are currently giving us.

=========

1-TRUMP TARIFFS & TRADE WARS

GLOBALISTS v "WE THE PEOPLE" (DECENTRALIZED POWER)

I written numerous times about the concerns with Globalization, Financialization and Mercantilism. Though they all brought with them powerful global economic growth, they have also begun to destabilized the global economic system.

POSITIVES => ECONOMIC GROWTH

• Globalization => Labor Arbitrage
• Financialization => Investment & Low Rates
• Mercantilism => Trade

NEGATIVES => INSTABILITY

• Globalization => Wealth Disparity
• Financialization => Lack of Price Discovery & Mispricing of Risk
• Mercantilism => Trade & Fiscal Imbalances

These are all major discussions, but what is needed is to put them in the context of the growing global Geopolitical conflict they have created. We now have the developed economies of the west in conflict on multiple fronts with the emerging economies of the east as the world shifts from a Unipolar World to a Multi-Polar world.

We have a conflict at the most basic level of how we chose to be governed. On the one had we have systems like those of the former USSR and China governed by a single party system built on the tenets of Socialism and Communism. On the other we built the west on Democracy and multi-party alternatives. In the latter, the power rests with people, in the former with the controlling party. The result is centralized power (the party) or decentralized power (the electorate); The Top Down exercise of power or the Bottom Up exercise of power.

History as well as nature has shown that flaw in one over the other is the failure to rapidly and effectively react to change. Change is the reality that nature has long understood to be: "Adapt or Die". Centralized power continuously fails this test resulting in bureaucracies, economic stagnation and falling standards of living.

We face that problem today in the west as governments have become increasingly excessive in size, scope of power and percent of the economy. The result is the same as those systems that have failed: bureaucracies, economic stagnation and falling standards of living.

The recent US election was very much reflective of this problem as the red wave indicated that 74M people felt completely disenfranchised from the American Dream and barely able to survive inflation, shrinking real disposable income and a falling standard of living.

THE NEW FORM OF MERCANTILISM

Mercantilism has been around in various forms since trade began to cross borders. It has taken many evolving forms, the most current form having taken shape during the 80's with trade between Japan and the US. It developed further as the Asian Tigers increasingly encroached on Japan's trade with the US and then again as China entered the WTO in 2002 and US trade deficits exploded.

The approach was simple enough in how it benefited both sides of the trade. Using China as an example, the elements consisted of:

• China would ship goods to the US at a landed price cheaper than could be matched by US Manufacturers due primarily to wage differentials and regulatory costs.
• The US would pay in US dollars which China would dominantly hold as FX reserves to restrict the full value of the dollar being taken as profit.
• China would hold the US Dollars in the form of US Treasury debt. The massive buying of US Treasury debt drove US borrowing rates down and the value of the US dollar higher.
• Low rates and a strong dollar allowed the US consumer to view and purchase Chinese goods as cheap and affordable, thereby increasing US Consumption.
• The US GDP grew as the US became a 70% consumption economy while experiencing an increasing standard of living and low inflation. Effectively the US was exporting inflation via the US dollar and growth of the "Eurodollar".
• The result was exploding US Trade and Fiscal Deficits as the US consumed more than it produced, at the same time as China became richer as a nation state.

It was a clever plan benefiting globalization and financialization. it also benefited Corporations and Governments.

• Corporations + Government = Consumer Consumption +Taxation (with the Rich & Corporations paying more Taxes & Campaign Contributions.
• Consumer corporations from WalMart to Amazon to BestBuy all grew profits dramatically.
• Meanwhile, the US consumer and US government grew debt and US high paying jobs steadily disappeared.
• The face of America changed as it became a franchised distribution centered for foreign built products.
• The reason the US Consumer has become so materialistic is because of key pillars:

1. A Social Safety Net that allows it, which countries like China don't have, so people must save for retirement, layoffs, medical crisis etc.
2. A Culture of Materialism that sustains it.
3. A Media & Political class that lives off it.

The hidden elixir in the equation was that China additionally subsidized through government bank financing and special treatment for State Owned Enterprises (SOEs). This is what is called "Dumping" when you have unfair trade practices involved.

USA HAS THE "TRUMP" CARD

President-elect Trump realizes the problem is existential and if continued will lead to a US debt crisis, financial ruin and the end of the USA know today.

He sees the solution as centered around the realization that the China (and the world) can't survive without the US Consumer. The US Consumer is the "Trump Card" which must be played to reverse coarse.

Trump believes that way to play the Trump card is through Tariffs, De-Regulation and Government Right sizing, which will pressure manufacturers to again manufacture in the US.

THE REALITY OF TARIFFS

About 95% of economists polled by the Kent Clark Center for Global Markets in September agreed or strongly agreed with the statement that “imposing tariffs results in a substantial portion of the tariffs being borne by consumers of the country that enacts the tariffs”. In other words, tariffs deliver inflation to the US consumer. This is the accepted counter argument mantra & conditioned response. This argument has stopped any form of serious thinking of using Tariffs to fight back.

Tariffs are absorbed by the importing country through importers. Those costs result in:

1- Lower Wages

2- Lower Profits and

3- Higher Inflation.

However, it is only those with Pricing Power in the supply chain who can pass the higher cost levels on. Therefore in fact, Inflation has been found to be relatively low.

(FT- Tariffs and taxes are not very inflationary).

• Economic theory and experience tell us tariffs are not inflationary.
• It’s correct to claim that a tariff on a good will raise its price. However, the claim fails to consider how consumers and sellers of the goods will react to higher prices.
• Once all the economic, price, behavioral and currency impacts net out, another round of tariffs will likely prove deflationary and harmful to economic growth.

Households will pay, but probably not through much higher prices

US HISTORY

Few today realize that prior to the adopting Income Tax this was the primary way the US financed the government.

THE REMOVAL OF THE BURDEN OF SUPPORTING THE WORLD

The US can no longer financially support the world as its foreign policy has effectively done since WWII.

• The US has become the Global Piggy Bank.
• UN
• NATO
• Involved in all crisis
• 600 Military Posts
• Arms and Support to Ukraine, Israel etc

This must end to protect the US Standard of Living and maintain the American Dream.

CONCLUSION

• Though Tariffs are paid by importers studies show that doesn't necessarily translate into direct consumer price inflation.
• Trump believes that the US Consumer is the winning Trump Card. Without it China and other export lead mercantilist nations are seriously jeopardized.
• The Trump Card is the strategic play to start a manufacturing reshoring shift back to the US.
• This shift will result in jobs, tax revenues and potentially ignite a revitalized US Investment and Re-Privatization paradigm.
• This is a big gamble by the new Trump Administration, but they view the current mercantilist driven debt path as being an existential threat to the US' survival.

2- TARIFFS, MERCHANDISING & "BIG 6" MARGINS

AFFORDABILITY

It’s noticeable that the word “tariff” and its derivatives appeared in more earnings call transcripts in the latest quarter — 1,969 globally according to Bloomberg Document Search — than at any time since the eve of the pandemic in the first quarter of 2020. This is far below the peak of more than 6,000 CEOs who wanted to talk about tariffs in the third quarter of 2019, when the Trump 1.0 measures were having their effect. So companies are not fully prepared for another trade war.

What the Q3 earnings calls pointed out was consumer-facing companies remain very worried about making their products affordable for customers. They share in the desire to bring inflation under control. By Goldman’s count, mentions of affordability in earnings calls have reached a new high in Q3.

Q3 EARNINGS

Executives, like the rest of us, were bothered by political uncertainty. The US election, widely called as a dead heat at the end of September, was having a deadening effect both on companies’ own investments and on customers’ willingness to buy. With a Republican clean sweep now locked up, a decision on the appointments to the Trump economic team is the last obstacle to bringing uncertainty back down to normal levels. That moment is getting closer, but it hasn’t arrived quite yet. 

Corporate America told us, while attention was turned to the ballot boxes, that it remains healthy. Earnings were comfortably ahead of expectation, which is largely a facet of the low bar of expectations coming in to earnings season. In broader context, however, the most important message is that company profits are a great protection against disappointing economic growth, even if they provide a much bumpier ride. This chart shows trailing 12-month earnings per share since 1995 for the US, the world and the world outside the US compared to the World Bank’s estimate of global GDP. The corporate sector continues to take a greater share everywhere. Recent US dominance, when the country has just decided to embrace “America First,” is awe-inspiring.

THE BIG SIX

Does this have to do with the US tech sector? Yes.

The US market would look very different without its dominant tech platform groups.

To illustrate, Jonathan Golub of UBS Group AG shows expected earnings growth by sector for this year. Their “Big Six TECH+” sector includes Amazon.com Inc., technically a consumer discretionary company, but omits Tesla Inc. from the standard Magnificent Seven. It’s quite a picture.

SECRET SAUCE => MARGINS

We know that the Magnificent Seven are growing gangbusters, but margins appear to be their real secret sauce. While profit margins accounted for 12.3 percentage points, or roughly half of the Big Six’s 24.5% earnings growth, according to UBS, they took three percentage points off the growth of the rest of the S&P 500’s overall expansion of 0.9%. To make the argument that the Big Six are monopolies, these numbers are a good place to start.

Goldman Sachs Group Inc., illustrates in the chart to the right how much the market is moving toward companies with high margins. It measures the current disparity in valuation according to a range of metrics. Small caps and companies that pay a high dividend yield are currently 1.5 standard deviations cheaper than their average for the last 35 years. Meanwhile, high-margin companies receive a far higher valuation than they have historically, some 2.5 standard deviations above the 35-year norm. As these companies are continuing to surprise on the upside and widen their margins, the money invested in them so far has been well rewarded. It’s a little hard to imagine this continuing.

Similar arguments apply in reverse if the energy and materials sectors, hammered by weaker commodity prices, are excluded. Globally, the equity strategy team at Deutsche Bank AG estimates that if these two sectors are removed, then earnings growth for everyone else improved slightly, to 11.9% from 11.2%, over the quarter. The market is over-excited about companies whose profitability looks hard to sustain, but earnings season definitely gives reasons for confidence about both the global economy and the stock market.

GLOBAL PICTURE NOT AS BAD AS THOUGHT?

The global picture justifies more optimism than the mood might indicate. The team at Deutsche took median rather than mean growth to help control for the Magnificent effect, and that revealed growth in emerging markets actually outstripping that of the US. That at least in part suggests that Chinese growth in particular, and the broader global economy in general, is in better shape than many tend to realize. Corporate Japan has had a problem with the sudden strengthening of the yen, which didn’t flatter overseas earnings in yen terms.

The consensus sees double-digit earnings growth in the US, Japan and EM, in both 2024 and in 2025. (These numbers will not yet take full account of the US election). Europe is seen as much more problematic, but not cataclysmic, with the consensus expecting a contraction of -1.5% this year to be followed by 7% growth in 2025.

DEVELOPMENTS TO WATCH

THE PLIGHT OF OUR FARMERS & US AGRICULTURE CONTINUES TO GO UNREPORTED!

Farmers have recently seen lower costs for regular expenses like feed and fuel, but at the same time a corresponding drop in selling prices has put farm incomes under pressure.

The U.S. Department of Agriculture (USDA) forecasts a drop in net cash farm income this year, driven by lower prices for food commodities. Even stronger headwinds lie ahead for farmers:

• PRICE DECLINES: Price declines have been especially acute for corn and soybeans, two staples of the Midwest agriculture sector.
• The most recent USDA forecast expects net cash farm income to slip by 7.2% in 2024, driven by a 27.7% decline in crop cash receipts. 
• If realized, net farm income would fall more than 25% below its recent peak in 2022.
• SUSTAINABLE PRODUCTIVITY INCREASES:  Real farm output, which includes crop production, animal production and aquaculture, rose 24% in Q2-2024 over the same quarter in 2019. 
• Farm output is currently at its highest recorded level since at least 1997, a testament to the resilience of the nation’s farmers and ranchers.
• GLOBAL DEMAND: Global appetite for U.S. agricultural products may lessen if the dollar appreciates against other currencies (like we currently expect).
• TARIFFS: The increased likelihood of higher tariffs on U.S. imports under the Trump Administration may result in retaliatory tariffs from our trading partners, putting agricultural exports at risk.

Sticker prices on grocery store shelves reflect a wide array of interrelated factors ranging from upstream raw material costs to global food demand and supply. One measure of food commodity prices is the CRB/BLS Foodstuffs Index, which has steadily trended lower since peaking in the summer of 2022. Although far above where they were before the pandemic, commodity prices have been retreating on an annual basis since early 2023, most recently declining 6.7% on a year-over-year basis in October 2024. This pullback has contributed to a moderation in “food at home” inflation and provided some relief to grocery store shoppers. On the other hand, prices received by farmers have declined 7.0% from the peak in December 2022, following the same downtrend in food commodity prices.

IF OUR FARMERS ARE IN TROUBLE - AMERICA IS IN TROUBLE!

UNITED NATIONS COP29 IS "DEADER THAN A DOORNAIL!"



COP29: Ministers told to ‘cut theatrics’, ‘move faster’ and ‘get down to business’ amid growing frustration at slow progress – as it happened.

The Guardian

The main lines from "non-action" at the summit:

• “Cut the theatrics,” UN climate chief Simon Steele told country representatives in Baku, after talks over the key issue of climate finance stalled, with developing countries insisting they need over $1tn a year and richer nations balking at the cost.
• There was a lot of frustration at COP29, with progress on a climate finance agreement very slow. Shirley Matheson, WWF global NDC enhancement lead, said: “There’s a lot of frustration in the room. There’s a lot of anxiety. There’s a need for parties to really get together and work through this."
• One of Europe’s top human rights officials accused COP29 host country Azerbaijan of jailing activists and journalists for their work and opposition to the authorities. Michael O’Flaherty, the Council of Europe commissioner for human rights, called for Azerbaijan to immediately release them.
• Australian climate change and energy minister Chris Bowen said that reaching an agreement before the week is out was proving difficult. Bowen said the finance goal needed to cover what he called “the big three” issues: the quantum, the contributor base and the structure of a funding agreement.
• The internationally agreed goal to keep the world’s temperature rise below 1.5C is now “Deader than a Doornail”, climate scientists have said. Three of the five leading research groups monitoring global temperatures consider 2024 on track to be at least 1.5C (2.7F) hotter than pre-industrial times.
• But senior US officials insisted the world can still meet the 1.5C target, but not without ambitious climate action from China. In recent days, the US and China have reaffirmed joint commitments to reduce greenhouse gas emissions other than CO2, a rare example of collaboration between the rivals.
• Meanwhile, the UK and the US signed a new agreement for civil nuclear collaboration on the sidelines of Cop negotiations. The agreement aims to pool billions in research funds to speed up the development of new technologies such as advanced modular reactors.

COP29 ATTENDEE: "THIS IS WHAT WE ARE UP AGAINST!"

1. Bad actors spreading disinformation online to fuel intolerance.
2. Teams of lawyers from the rich and powerful trying to stop us publishing stories they don’t want you to see. 
3. Lobby groups with opaque funding who are determined to undermine facts about the climate emergency and other established science. 
4. Authoritarian states with no regard for the freedom of the press.

THIS WHOLE UN MOVEMENT IS ON THE PATH TOWARDS IRRELEVANCE!

CHART TOP & BELOW: We are making almost no progress other than media pages dedicated to the subject.

“The impacts of climate change are becoming increasingly dramatic, yet we still see no sign that burning of fossil fuels has peaked.”  - International Global Carbon Project team

GLOBAL ECONOMIC INDICATORS:

What This Week's Key Global Economic Releases Tell Us

US

HOUSING STARTS / BUILDING PERMITS

• Privately-owned US Housing Starts fell by 3.1% in October from prior 1.353mln to 1.311mln, beneath the 1.33mln forecast.
• Single-family housing starts in October fell 6.9% to 970,000.
• Meanwhile, multi-family starts were 326k.
• Privately owned building permits declined by 0.6% from 1.425mln to 1.416mln, beneath the 1.43mln forecast.
• Single family permits rose 0.5% to 968k, while multi-family permits were 393k.
• Oxford Economics highlight that starts were a touch weaker due to the impact of Hurricanes, but they expect starts in the South to rebound as rebuilding in the areas most impacted by the storm gets underway.
• Looking ahead, Oxford Economics "expect a gradual improvement in starts throughout the year, but see downside risks to our forecast from sticky mortgage rates, as well as labor shortages and higher building costs if we take President-elect Trump's policies on immigration and tariffs at face value".

EMPLOYMENT - THE MESSAGE IN JOB SWITCHERS & QUITS

The overall jobless numbers in the US have so far thwarted predictions of an imminent recession. With Donald Trump taking office and an agenda virtually certain to spark fresh growth in the short term, it’s reasonable to worry more about overheating than any slowdown.

But there are two charts of the US jobs market that make analysts go hmmmm?

1- First, the Atlanta Fed’s wage tracker series measures wage rises for those who switch jobs and those who stay. Wage rises are usually bigger for switchers, as this is generally the reason they decide to move in the first place. Stayers get higher raises, as a rule, only when the economy is really tough and the switchers are moving because they have to.

The “switcher’s premium” hit an all-time high in 2022 as the Great Resignation put negotiating power emphatically in the hands of employees. That’s declined; it’s now lower than the norm for the last quarter-century, and earlier this year even went negative. (chart above right)

2- For another disquieting sign, the JOLTS (Jobs and Labor Turnover Survey) shows that the rate of quitting, which peaked at a remarkable level following the pandemic, is now back below its norm. The quit rate is where it was in early 2008, when the economy was beginning to weaken alarmingly. This looks like further evidence that workers are finding that the labor market is turning against them. (chart right)

As Peter Tchir of Academy Securities says: “My take on the quit rate is that it is ‘crowd-sourced’ data. Every individual has a pretty good idea about their own job prospects, and that gets reflected in the quit rate.” There are problems with low response rates and other distortions post-Covid, but this seems a wise assessment. Amid much anxiety about continuing inflation, reflected in spades by the result of the US election, it looks like workers are inhabiting a world where finding a job is getting difficult.

This doesn’t mean that it’s safe to ignore inflation, because it isn’t. The pendulum has swung against major rate cuts for good reason. But it’s important to question assumptions, and these charts certainly raise questions. 

GLOBAL

WHAT DOES YOUR SCAN OF THE DATA BELOW TELL YOU? - THE MEDIA AVOIDS BAD NEWS!

We present the data in a way you can quickly see what is happening.

THIS WEEK WE SAW

Exp. =Expectations, Prev. =Previous

MASSIVE RETHINK OF FED RATE CUTS

CUT EXPECTATIONS DOWN FROM 260 bps TO 50% OF ONLY 50-75 bps

CHART ABOVE: US equities saw the largest 3-month inflows since 2021 and potentially one of the largest monthly inflows on record into US stocks.

But even though the S&P 500 is still only a whisker away from all-time highs, its strong post-election rally has also started to lose momentum. Under the surface, breadth for the index has been lackluster after a particularly strong showing on Nov. 5, before jumping steeply again on Thursday. This indicates that below the surface the market is more split — it’s not a rising tide lifting all boats.

CHART ABOVE RIGHT: Bitcoin was the big name this week, continuing its charge towards $100k, (now up 45% since right before the election results). If global liquidity is anything to go by, we touch $135k before we see any serious selling pressure.

1- SITUATIONAL ANALYSIS

SEASONALS

CHART RIGHT: More than one-fifth of the stocks in the S&P 500 Index, Nasdaq 100 and Russell 2000 were at 52-week highs last week. Yet within that same week there were already more stocks at new lows than new highs.

Such a reversal is rare, especially across all three of the gauges at the same time, an analysis by SentimenTrader found.

CHART BELOW: The only time when all three indexes saw this kind of new-high-to-new-low whiplash was in early May 2010, which was not a pleasant time to bet on a rebound, because all three saw heavy losses through July. But, for now, the seasonals are with you until the inauguration.

SENTIMENT

FEAR-GREED INDEX

We have yet to see extreme greed, despite the melt up.

ASSET MANAGERS & HEDGE FUNDS "ALL IN!"

The longer term view shows the crowd is long.

S&P 500 & COMBINATION OF FORWARD PE,VIX & BULLISH SENTIMENT

Bullish sentiment among investors in the U.S. stock market only continues to soar, reaching new all-time highs.

WEEKLY ETF FLOWS (IWM+XLF+HYG)

Recent market behavior indicates a substantial increase in investor optimism, evidenced by notable shifts towards riskier assets including small caps, financials, and junk bonds.

S&P 500 WEEKLY % CHANGES

The S&P 500 posted its best weekly gain of 2024 and its third-strongest Presidential Election week since 1928, rising 4.7% as investors cheered Donald Trump’s victory and the prospect of business-friendly policies.

RETAIL COMING IN HARD

Record $448bn YTD annualized inflows into US stocks. When the retail crowd enters and equity fund cash balances are extremely low we need to ask where will the new buyers come from??

A YEAR-END MELT-UP??

From a factor perspective, the Morgan Stanley quant team examined if we are having a bit of a momentum fatigue here. His conclusion? In the 4 years where US Momentum has been up >20% up to the middle of November since 1999, 3 out of 4 times US Momentum has risen a further 10%+ by the end of the year. So it looks historical experience bodes well for the year end.

3M STOCK DISPERSION

Dispersion in stock returns the highest in over 4 years.

MOMO

US 1M Momo has rallied 18% in a week, pushing the 14D RSI to the most overbought level since 2007. The gap between winners and losers in the US continues to grow with dispersion in stock returns the highest in over 4Y. Is there more room to go in the rally or is the rally over? That’s the $$$ questions on the back of investors’ minds.

SECTOR ROTATION

US equities are currently pricing a very optimistic growth environment. Goldman's sector model leads them to recommend overweight positions in Materials, Software & Services, and Utilities.

EVERYONE IN (ABOVE SENTIMENT CHARTS) - WHO IS LEFT TO BUY (LOWER CHART)?

..and are they?

CHART BELOW: Rolling four-week avg. flows are negative the past four weeks.

CHART BELOW: Hedge Funds in the process of trimming Mag-7 portfolio holdings.

Hedge funds have been selling & selling. Note, The Mag 7 stocks represent a 31.71% weighting in the S&P 500 index.

Funds have trimmed exposure to the Magnificent 7 in aggregate (data 6 weeks old).

STILL A KNIFE'S EDGE AS OF WEEK'S CLOSE

NASDAQ

WHAT WE HIGHLIGHTED IN THE WEEKEND REPORT:

The NASDAQ has almost retraced the entire Trump bump. Nasdaq saw its worst week in the last ten weeks. We are breaking below the 21 day, approaching the 50 day and the positive trend line. 20400 (futures) is the make or break area. (CHART)

WHAT WE HAD AS WEDNESDAY CLOSE: (CHART)

Very important trend line as well as the 50 day coming up. Make or break.

S&P 500

WHAT WE HIGHLIGHTED IN THE WEEKEND REPORT:

The S&P 500 has so far reversed perfectly on that upper trend line. We are hitting the first supports as of writing, the 5900 area, give or take. This is where the 21 day comes in as well as being half the big post Trump candle. 50 day is still way lower, down at the lower part of the trend channel. (CHART)

WHAT WE HAD AS WEDNESDAY CLOSE: (CHART)

SPX is approaching must hold levels again. The lower touch of the trend channel comes in around 5900 (futures) and the 50 day around 5850. Despite the bullish "feeling", the SPX is at mid October levels, not showing much of that year end melt up mojo so many are waiting for...

CHART BELOW: SOX at the very important trend line, trading below the 200 day, but still trying to hang in there. Let's see what NVDA brings, but SOX "can't afford" to close much lower. That Head & Shoulders formation could be huge.

2- FUNDAMENTALS

HISTORIC S&P 500 PERFORMANCE - May Not Last Much Longer Before a Corrective / Correction

The S&P 500 is currently posting its strongest performance of the 21st century, with historical trends suggesting that this momentum MAY continue to drive further gains. NOTE: This is measured in DAYS done and to go!

S&P 500 PERFORMANCE

The S&P 500’s exceptional performance in 2024 ranks among its strongest since 1928, with historical trends indicating potential for continued momentum.

AS A CONSEQUENCE, VALUATIONS ARE EXTREMELY STRETCHED!

CHART BELOW: 4th highest S&P 500 trailing P/E in the past 124 years!

VALUATION - FORWARD 12-MONTH PE FOR S&P 500

While U.S. equities are trading at a premium to global stocks, this situation reflects both the strength of the U.S. market and economy. But there are potential risks associated with high valuations and market concentration.

S&P 500 VALUATION MULTIPLE

Despite the U.S. stock market’s robust performance, the growing gap between earnings growth and price increases has inflated valuations to potentially unsustainable levels, warranting caution based on historical trends.

VALUATION - S&P 500 NTM P/E

The increasing term premium warrants close attention due to its substantial effects on equity valuations and overall market behavior.

VALUATIONS - REAL S&P 500 INDEX WITH RECESSIONS & S&P 500 SHILLER CAPE RATO

While valuations alone do not guarantee market movements, current elevated valuations of the S&P 500 are a point of concern that investors should be aware of.

DON'T FORGET CORPORATE BUYBACKS: The strongest 2 month period of the year for the biggest buyer. The buyback "delta" is huge. Open orders for Q4 are $5B/day.

1. November is the top month for corporate buybacks, with November/December as the strongest two-month period.

2. November historically accounts for 10.4% of annual spend, with ~$100B in share repurchases expected this month.

3. Estimated ~$6B daily VWAP demand over 19 trading days, potentially amplified during late-month low liquidity around Thanksgiving.

THE BUYBACK BAZOOKA!

NOTE

NEW IMAGE CHANGES ARE LABELED WITH A BLUE TRIPLE ***STAR***

OLD IMAGE CHANGES ARE LABELED WITH A RED TRIPLE ***STAR***

OLD IMAGES REFLECT MINIMAL CHANGE (Wasted Time!), but Narrative is ALWAYS updated.

ALL IMAGES UPDATED WEEKLY (EITHER THE MID-WEEK OR WEEKEND REPORTS).

REMEMBER: SIMPLY CLICK YOUR LIVE SUBSCRIBER LINK TO SEE THE LATEST CHART.

3- TECHNICAL ANALYSIS.

***THE MATASII BANK INDEX***

• The MATASII Bank Index exploded higher on the Trump win and has continued higher closing at a new high on Friday.
• In the bottom panel the MATASII Proprietary Momentum Indicator tested support this week (dashed orange trend line) as part of its climb higher.

YOUR DESKTOP / TABLET / PHONE ANNOTATED CHART

Macro Analytics Chart Above:  SUBSCRIBER LINK

***THE MATASII FINANCIAL INDEX***

• The MATASII Financial Index exploded higher on the Trump win and has continued higher, closing near its prior high on Friday.
• In the bottom panel, the MATASII Proprietary Momentum Indicator suggests the index wants to move higher to test overhead resistance at the Black Dashed Trend Line.

YOUR DESKTOP / TABLET / PHONE ANNOTATED CHART

Macro Analytics Chart Above:  SUBSCRIBER LINK

***IWM - LONG iShares Russell 2000 ETF - Daily***

• The IWM - LONG iShares Russell 2000 ETF rose sharply this week nearings its prior high.
• The IWM Proprietary Momentum Indicator (lower panel) suggests the IWM is looking to test overhead resistance at the Black Dashed trend line shown on the chart.

YOUR DESKTOP / TABLET / PHONE ANNOTATED CHART

Macro Analytics Chart Above:  SUBSCRIBER LINK

***NVIDIA - NVDA - DAILY***

CHART RIGHT: Nvidia has repurchased $55 billion in stock since 2022.

With a market cap of $3.61tn and nearly as big as the entire DAX and CAC combined, earnings is going to be a big event. To give you a scale for their astonishing earnings trajectory over such a short period of time, at the recent lows in Jan 2023 Nvidia earned $4.4bn over the preceded last 12m. However, today the consensus will see them earn $61.4bn over the last 12 months. Then, by the time we hit 2027, they are expected to earn $118.1bn LTM.

Today's Note:

• Shares of Nvidia fell as much as 5% in after hours trading following its earnings announcement Wednesday, before settling about 2% lower, far below the 8.8% straddle. They previously closed at $145.89 in New York.
• During the remainder of this week, NVDA showed overall weakness and closed at lower levels.
• NVDA found support Friday at the dotted black trend line of its MATASII Momentum Indicator (lower panel).

Longer Term Note:

• At some point, the major unfilled gaps (at much lower levels) must be filled. We anticipate a likely test of the 200 DMA in Q1 2025.
• NVDA therefore may no longer become a Short to Intermediate Long Term hold, but rather a position trading stock, as other competitors enter the space and force margins and the earnings growth rate to contract. 

YOUR DESKTOP / TABLET / PHONE ANNOTATED CHART

Macro Analytics Chart Above:  SUBSCRIBER LINK

CONTROL PACKAGE

1. APPLE - AAPL - DAILY (CHART LINK)
2. AMAZON - AMZN - DAILY (CHART LINK)
3. META - META - DAILY (CHART LINK)
4. GOOGLE - GOOG - DAILY (CHART LINK)
5. NVIDIA - NVDA - DAILY (CHART LINK)
6. MICROSOFT - MSFT - DAILY (CHART LINK)
7. TESLA - TSLA - DAILY (CHART LINK)

AS GOES NVDA SO GOES THE MAG-7!

AS GOES THE MAG-7 SO GOES THE MARKET!

***MAGNIFICENT 7***

CURRENT DAY'S VIEW:

• The Mag-7 continues to hover around support at the mid-point of its long term rising trend channel. (dotted black line).
• Overall weakness was seen in AMZN, GOOG and NVDA tis week.
• Meanwhile the MATASII Proprietary Momentum Indicator (lower pane) has yet to reach overhead resistance at the dotted black trend line and has drifted horizontally as we enter the Thanksgiving shortened trading week.

YOUR DESKTOP / TABLET / PHONE ANNOTATED CHART

Macro Analytics Chart Above: SUBSCRIBER LINK

"CURRENCY" MARKET (Currency, Gold, Black Gold (Oil) & Bitcoin)

***10Y REAL YIELD RATE (TIPS)***

Real Rates have broken through its upper trend channel line (shown in the chart to the right - as of close 11/15/24). (LATEST)

CONTROL PACKAGE

There are TEN charts we have outlined in prior chart packages, which we will continue to watch closely as a CURRENT Control Set:

1. US DOLLAR -DXY - MONTHLY (CHART LINK)
2. US DOLLAR - DXY - DAILY (CHART LINK)
3. GOLD - DAILY (CHART LINK)
4. GOLD cfd's - DAILY (CHART LINK)
5. GOLD - Integrated - Barrick Gold (CHART LINK)
6. SILVER - DAILY (CHART LINK)
7. OIL - XLE - MONTHLY (CHART LINK)
8. OIL - WTIC - MONTHLY - (CHART LINK)
9. BITCOIN - BTCUSD -WEEKLY (CHART LINK)
10. 10y TIPS - Real Rates - Daily (CHART LINK)

***US DOLLAR - DXY - DAILY***

CHART RIGHT: Moving in Tandem

Rising Treasury Yields and a Rising Dollar are currently the same trades!

MATASII CHART BELOW:

CURRENT DAY'S VIEW -

• The dollar exploded higher on the Trump win, hitting 12-month highs at its peak overnight.
• This was the dollar's biggest daily gain since Feb 2023. The dollar then rallied for the seventh straight week top, its highest since Nov 2022.
• The dollar has only continued to rise further with the DXY decidedly breaking its overhead black dashed trend line shown on the DXY chart and closing Friday above the high of September 2023.
• The DXY since the Trump win has closed above the overhead resistance (large black dashed trendline) in a very decisive manner.

THE BREAKING OF THESE TREND LINES SUGGEST POTENTIAL MAJOR CHANGES ARE UNDERWAY IN THE PERCEPTION OF THE US DOLLAR.

YOUR DESKTOP / TABLET / PHONE ANNOTATED CHART

Macro Analytics Chart Above:   SUBSCRIBER LINK

***GOLD***

CHART RIGHT:

Gold is waking up to a "new" world where it simply can't take the dollar strength that the Trump win brought to the party. However, Trump also brings major deficit spending (inflationary).

SPOT GOLD

Gold now trades near a two-month low as investors digest Powell’s remarks and adjust their monetary policy outlook. Lower interest rates are less likely to benefit the precious metal.

CHART BELOW:

• Gold found support last Friday at the 100 DMA and bounced hard this week, back well above its 50 DMA.
• Gold ran up against its MATASII Momentum Indicator resistance trend line (dotted orange trend line) on Friday.

YOUR DESKTOP / TABLET / PHONE ANNOTATED CHART

Macro Analytics Chart Above:  SUBSCRIBER LINK

***SILVER***

• Having found support at the 100 DMA, Silver has pushed higher approaching overhead resistance near the 50 DMA.
• In the lower panel we see Silver is hovering at the lower support MATASII Momentum Indicator (orange dotted trendline). We suspect Silver needs to test the lower Momentum Indicator support level last tested in late summer.

YOUR DESKTOP / TABLET / PHONE ANNOTATED CHART

Macro Analytics Chart Above:  SUBSCRIBER LINK

US EQUITY MARKETS

CONTROL PACKAGE

CHART RIGHT: We have reached our first level of the Cup & Handle at approximately 5930 on the S&P 500.



There are FIVE charts we have outlined in prior chart packages that we will continue to watch closely as a CURRENT "control set":

1. The S&P 500 (CHART LINK)
2. The DJIA (CHART LINK)
3. The Russell 2000 through the IWM ETF (CHART LINK)
4. The MAGNIFICENT SEVEN (CHART ABOVE WITH MATASII CROSS - LINK)
5. Nvidia (NVDA) (CHART LINK)

***S&P 500 CFD***

• The S&P 500 cfd moved to a new high on the Trump victory putting in a new high. Since then it has hovered around its 21 DMA but closed above it Friday at 5976.
• The MATASII Proprietary Momentum Indicator (middle panel) offered overhead resistance at a longer term overhead resistance trend line (dotted black line) during the initial post Trump victory, before falling back. The trend is still up, but momentum appears to be fading gradually.

YOUR DESKTOP / TABLET / PHONE ANNOTATED CHART

Macro Analytics Chart Above:  SUBSCRIBER LINK

***S&P 500 - Daily Our Thought Experiment***

OUR CURRENT ASSESSMENT IS THAT THE INTERMEDIATE TERM IS LIKELY TO LOOK LIKE THE FOLLOWING:

CHART RIGHT: In its base case scenario, Goldman Sachs projects a year-end 2024 price target of 5,600 for the S&P 500 index, supported by robust earnings growth and a stable price-to-earnings ratio.

NOTE: To reiterate - "the black labeled activity shown below, between now and September, looks like a "Killing Field", where the algos take Day Traders, "Dip Buyers", the "Gamma Guys" and FOMO's all out on stretchers!"

• The S&P 500 moved to a new high on the Trump win. Since then it has hovered around its 21 DMA, but closed above it Friday at 5969.
• The MATASII Proprietary Momentum Indicator (middle panel) offered overhead resistance at a longer term overhead resistance trend line (dotted black line) during the initial post Trump victory, before falling back. The trend is still up but momentum appears to be fading gradually.
• 
  

YOUR DESKTOP / TABLET / PHONE ANNOTATED CHART

Macro Analytics Chart Above:  SUBSCRIBER LINK

STOCK MONITOR:  What We Spotted

BOND MARKET

LOWER BOND YIELDS CORRECTLY SPOT A WEAKER MACRO

CONTROL PACKAGE

There are FIVE charts we have outlined in prior chart packages that we will continue to watch closely as a CURRENT "control set":

1. The 10Y TREASURY NOTE YIELD - TNX - HOURLY (CHART LINK)
2. The 10Y TREASURY NOTE YIELD - TNX - DAILY (CHART LINK)
3. The 10Y TREASURY NOTE YIELD - TNX - WEEKLY (CHART LINK)
4. The 30Y TREASURY BOND YIELD - TNX - WEEKLY (CHART LINK)
5. REAL RATES (CHART LINK)

FISHER'S EQUATION = 10Y Yield = 10Y INFLATION BE% + REAL % = 2.352% + 2.063% = 4.415%

20YR AUCTION: The US Treasury sold USD 16bln of 20yr bonds at a high yield of 4.680%, tailing the when issued by 3bps, the largest tail for the 20yr auction since February's 3.3bps tail. The bid-to-cover saw a notable drop to 2.34x from 2.59x prior and the six auction average of 2.6x. The breakdown was also weak with dealers, forced surplus buyers, taking 22.6% of the auction, up from the 14.5% prior and six auction average of 11.2%. Direct demand was very weak at just 7.9%, while indirect demand rose to 69.5%, but beneath the six auction average.

CHART BELOW:

Rates have definitely overshot the normal pattern post the first cut.

"...perpetually deeper Deficit spending trajectory with Fiscal policy dominance”—which in a forward “macro vacuum” then risks “sticky higher inflation” = “sticky high nominal GDP” at least in the US—and also then implies a meaningfully higher “Neutral Rate” than is currently being acknowledged by folks at the Fed —and thus, a shallower “Easing Path” / a higher “Terminal Rate” than is currently being assumed by many in the Market".

***10Y UST - TNX - WEEKLY***

CURRENT DAY'S VIEW:

• Yields closed this week 4.41% up against an overhead resistance trendline (dotted black trendline).
• The Proprietary MATASII Momentum Indicator (lower pane) is now showing momentum has broken decisively through its overhead resistance trendline (dotted black line) but is now losing momentum.

YOUR DESKTOP / TABLET / PHONE ANNOTATED CHART

Macro Analytics Chart Above:  SUBSCRIBER LINK

***10Y UST - TNX - HOURLY***

CURRENT DAY'S VIEW:

• Yields closed Friday at 4.41% level and up against an overhead resistance trendline.(dotted black trendline)
• The Proprietary MATASII Momentum Indicator (lower pane) is now showing momentum, having found support at the long term black dashed trendline.

YOUR DESKTOP / TABLET / PHONE ANNOTATED CHART

Macro Analytics Chart Above:  SUBSCRIBER LINK

COMMODITIES

***CRB COMMODITY INDEX - MONTHLY***

• The overall Commodity Indexes, as measured by the CRB Commodity, reflect a Corrective / Consolidation is presently nearing completion.
• However, many of the individual sectors (not shown here) have already completed the Corrective / Consolidation and broken higher over the last 30-60 days.

• Examples:
• Invesco DB Agricultural Fund (DBA)
• VanEck Agribusiness (MOO)
• Food Producers (FT350 Food Producers - NMX45)
• Teucrium Agricultural Fund ETV (TAGS)
• Advisory Shares Restaurant ETF (EATZ)
• Invesco Food & Beverage ETF (PBJ)
• Teucrium Wheat Fund ETV (WEAT)
• Teucrium Corn Fund ETV (CORN)
• Teucrium Soybean Fund ETV (SOTB)
• Teucrium Sugar Fund ETV (CANE)

YOUR DESKTOP / TABLET / PHONE ANNOTATED CHART

Macro Analytics Chart Above:  SUBSCRIBER LINK

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2020 VIDEOS OUTLINING THE COMING RISE IN INFLATION, STAGLFLATION & COMMODITY PRICES

THE REGULATORY STATE

RELEASED - 01-17-24 --- 212 Page Paper

$9.99 to Download

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