In Case You Missed It: Key Charts of the Week

By Mark Masterson on April 5, 2024

It has been said “a picture is worth a thousand words.”
 With that in mind, below below are a few of the I believe and agree with Powell in his comments that there is too much focus on the Fed.  The Fed is taking a back seat to Yellen and the Fiscal policy.

The numbers are mind numbing.

Yellen has shifted to borrowing short term.  She has issued T bills that mature in less than one year over the past 12 months.  In fact, T-Bill issuance is at a two-decade high, and comprises greater than 85% of all US Treasury issuance.

You can see that Yellen has issued $21 trillion in bills over the past 12 months…..

Bank of America 4 1 24

According to Bank of America and Michael Hartnett – these are the stats…..

• “US government spending past 5 months = $2.7tn
• The spending is up 9% YoY…and is on course for $6.7tn in FY24
• The US national debt rising $1tn every 100 days…and is set to hit $35tn in May’24, $37tn by US election, $40tn in H2’25”

Hartnett

Here is how that looks……

Bank of America 4 1 24

With Yellen issuing all short term debt – the interest on that debt has been rising.  Remember, the Fed controls the short end of the curve and has kept rates “higher for longer.”

You can see that interest paid on US government debt has hit $1.1 trillion over the last 12 months.

This is the real reason why the Fed is considering cuts this year.

Bank of America 4 1 24

You can see what happens if Powell keeps rates up…..

By December, the interest on the debt will be $1.65 trillion.

If Powell cuts rates, the interest will be $1.2 trillion

Again – I believe this is the reason Powell is staying with his rate cut outlook – despite rising inflation over the past month.

Bank of America 4 1 24

It’s nice to see that in the first quarter, tech was not the leader.

In fact, four sectors outperformed tech – and energy led the way

Strategas 4 1 24

This market concentration has moved up to the number two spot historically.

Today’s mkt cap concentration in the top 10% largest US stocks has only occurred one other time in history in 1929…

Deutsche Bank 4 1 24

As mentioned above, after such a strong run, the market is stretched.

The S&P 500 has closed in overbought territory (>1 st. dev. above its 50-DMA) for 50 consecutive trading days. 

The last time the index had a longer streak of overbought closes was more than 25 years ago in April 1998 (60).

Bespoke.com 4 2 24

Watch commodities.  They are moving higher.

I see no way this can continue without inflation also moving higher.

This is the CRB – Commodity index.

I have my eye on this rising wedge for the S&P 500.

This narrowing, rising wedge pattern typically ends with a decline.  The decline could potentially be sharp when it breaks as this run higher has stretched a good distance without any meaningful pause.  We are also stretched too far above the 200 day moving average as noted on the chart by the blue line.

I highlighted a few gaps way down below.  Gaps don’t always fill, but often do in time.  Just something to note, not a prediction.

Bond yields have been in a grinding higher pattern.  They are up again today.

Persistent inflation, steady economic growth, and massive deficit spending may be weighing on the 10 year treasury bond, pushing yields higher.

It is now back over the breakout and breakdown line.  (red dotted line)

I don’t want to see this push too much higher as it will weigh on markets.

This was the headline:  FED’S POWELL: I DON’T THINK INFLATION IS REVERSING HIGHER.

Well, perhaps Powell should be a bit more intellectually hones and just look at the data.  Here is the one month change for CPI going back to October….

Markets and Mayhem 4 3 24

If you don’t believe the data, then believe your eyes.  Below are the charts for housing, crude, gold, silver, copper all year to date……

They are moving higher, which will drive inflation.

Northman Trader 4 3 24

A quick update on the commodity index chart.

The rounded bottom is completing and we are now starting the rise.

How far can it rise?  I’ll show you in the next chart.  Do notice that we are now a bit overbought in the short term (highlighted at top) which could open the door for a pause here.  But – it will likely be a pause only.

This is the big picture for the CRB index.

It started the bull market in 2020 after it broke higher/

That wave peaked in 2022 and we started a pull-back.  I highlighted that in green.  We are now breaking out of that move and making higher highs.

It looks like a bull flag to me, and that suggests we may get a move out of that correction that is equal to the first move.  I highlighted what that could look like.

Earlier this week – I posted this chart of the S&P 500 rising wedge……

I have my eye on this rising wedge for the S&P 500.

This narrowing, rising wedge pattern typically ends with a decline.  The decline could potentially be sharp when it breaks as this run higher has stretched a good distance without any meaningful pause.  We are also stretched too far above the 200 day moving average as noted on the chart by the blue line.

I highlighted a few gaps way down below.  Gaps don’t always fill, but often do in time.  Just something to note, not a prediction.

Update: Here is what it looks like today….

We see a break lower yesterday – down out of the wedge.

The next few days will be a battle in the markets to regain that wedge.

If the market can’t bounce back into that pattern – we will likely begin the corrective process for stocks that is overdue…..