Global Macro Monitor

The S&P500 did all the right things this week, closing at its high for the month/year, making a new intraday high for the month, and breaking above its downtrend line.  As we noted last week, the stock index is trading in a 300-point range, bookmarked at its December high and low, at 4100.96 and 3764.49, respectively.  The S&P was rejected right at the top of the range today at its intraday high of 4094.21.  Watch for a breakout or fail at the key level of 4100.96.  

The key .50 fib at 4155.10 is a big number.   

FOTD:  Factoid of the Day

This is hard to believe, but ZME has high cred ratings. 

In NYC, there are more Italians than in Rome, more Irish than in Dublin, and more Jews than in Tel Aviv. –  ZME Science

The S&P 500 index closed the week right on its 200-day moving average.  The index is trading in a 300-point range, bookmarked by the December low at 3746.49 and high, at 4100.96.  It’s positive the index has stayed above the December low for the month of January. 

The .382 Fibo at 3998.51 has established a key resistance level.  Watch this price point.

The U.S. budget deficit has stabilized from the COVID shock and is beginning to tick up again.  The budget shortfall is set to move higher, driven by interest payments on the national debt as the interest rates are now significantly higher, coupled with lower tax revenue as the economy slows. 

The supply and demand dynamics in the Treasury market have deteriorated with the Fed and foreign central banks, the largest buyers over the past few decades, now net sellers.  The structural pressure for Treasury yields is to move higher as the deficit increases. 

Zero Sum Game

The financial markets are now in a zero-sum game as the central banks curb their Treasury holdings. The fund flows to finance the trillion-dollar-plus U.S. budget shortfalls must come from other asset markets or absorb and divert a larger portion of savings otherwise directed to asset markets. 

Crowding out is the word.  Listen for it.