Investment Strategy US RESEARCH | PUBLISHED BY
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Morning Tack - “One More Time”
Jeffrey D. Saut, Chief Investment Strategist (727) 567-2644
Yesterday, piqued by my never-ending rant that everybody is looking at the wrong yield curve instead of the real curve of the 3 month T’bill to the 30 year T’bond, I got this email from one of the best portfolio managers I know. Craig Drill (Drill Capital) wrote:
"Doesn’t the investment meaning of a flattening or inverting yield curve depend on WHY it is flattening or inverting? If it is because the Federal Reserve is raising short-term interest rates and reducing credit availability, that is a negative at some point. If, however, it is because long rates are falling because of muted inflation and -0- rates in Germany and Japan, isn’t that ultimately bullish?"
As a sidebar, I would note that despite all the cries that a recession is coming, I would ask if that is the case, why is Dr. Copper (the ultimate recession predictor) acting rather well?
Speaking to ultimately bullish, I cannot get much more bullish than I already am. That said, on a very short-term trading basis, the positive energy flow I was looking for later this week seemed to arrive yesterday as Monday’s “stall,” which my work suggested would last at least another session or two, got blown out of the water early yesterday. Indeed, the D-J Industrial Average leaped over 100 points on the opening bell and then extended that rally to over 250 points by 11:00 a.m. From there, however, stocks peaked and began to fade, yet still managed to leave the senior index higher by some ~141 points on the close. Ladies and gentlemen, we are in a credit boom and a secular bull market that has years left to run. Readers should recall that secular bull markets last 15+ years and DO NOT end because of a mere 20% decline.
Despite yesterday’s fade, the stock market’s internals were pretty good. As Lowry’s writes:
"Although the DJIA and S&P 500 closed well off their highs for the day today, market internals were positive. Up Volume was 79% of total Up/Down Volume while Advances were 74% of total Advancing/Declining Issues."
My monthly indicators still have plenty of internal energy, but in the short run, the stock market’s internal energy, by my pencil, still needs to be rebuilt, despite yesterday’s rally. Regrettably, this still leaves me somewhat non-committal on a near-term trading basis but has NOTHING to do with my long-term secular bull market thesis. And then, as another sidebar, I received this from someone that read my “Trading Sardines” report last Monday:
"Dear Sir, I noticed the sardine parable in your commentary and attribution as anonymous. In fact, I was present when Murray Pezim made the joke with all biblical names of Abraham to Aaron sold to Joseph to explain a whirlwind of activity in junior mining in the early eighties. It was his signature joke, but of course he was friends with Milton Berle and Red Buttons. Just thought you might want to know. Sincerely,Victor"
This morning the preopening futures are flat on no news.
March 27, 2019
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