Thursday, June 7, 2018

The Morning Call--Is euphoria returning?


The Morning Call

6/7/18

The Market
         
    Technical
                   
The Averages (DJIA 25146, S&P 2772) had a banner day though volume was flat.  Breadth was positive.   The Dow finished above its 100 day moving average (now resistance; if it remains there through the close on Friday, it will revert to support).  The S&P ended above its 100 day moving average (now support).  Both remained above their 200 day moving averages (now support).  The Dow is in a short term trading range, the S&P in a short term uptrend. 

The resistance from the 100 day moving average seems about to give way with the  Dow ending about its MA and the S&P pushing out of the trading range that developed around its MA.  Assuming follow through, the next resistance levels are the former highs.  Longer term, the assumption is that stocks are moving higher.
               
                The VIX fell 6 %, finishing below its 100 and 200 day moving averages (now resistance) and below the upper boundary of its short term downtrend---pointing to higher stock prices.

The long Treasury again declined, this time by ¾ %, ending below its 100 day moving (now support; if it remains there through the close on Friday, it will revert to resistance), below its 200 day moving average (now resistance).  It remained within its long term uptrend (though it is very near the lower boundary) and short term downtrend.

The dollar fell fractionally, closing above its 100 and 200 day moving averages (now support) and in short term uptrend. 

GLD had another up day, but still ended below its 100 and 200 day moving average (now resistance) and right on the upper boundary of its short term downtrend.
               
Bottom line:  the Averages appear to be breaking away from their 100 day moving average; if so, then 26656/2874 (former highs) will likely be the next stop and clearly gives support to the assumption that stock prices will go even higher.  The pin action in TLT and UUP seem to be confirming a strong economy and higher rates; GLD not so much.
           
            Yesterday in the charts (medium):
           
            The latest on oil (medium):

    Fundamental

       Headlines

             Yesterday’s economic data was mixed: weekly mortgage and purchase applications as well as the April trade deficit were better than anticipated; however, first quarter nonfarm productivity and unit labor costs were disappointing.
           
            Aside from some hot political headlines on Iran and the FBI (no comment) and minor items on Italy, the ECB and the upcoming G7 meeting, there is very little on which to comment.  So I won’t.

            ***overnight, the rhetoric ahead of the G7 meeting is heating up (medium):

            And another central banker begs the Fed to stop tightening (medium):

            Bottom line: it appears that investor euphoria has returned.  Of course, follow through is still needed.  As you might expect, I am not sure why stocks are popping.  But that doesn’t matter.  What does matter is that I not get sucked into chasing a rally at a time when valuations are at or near all-time highs.  Indeed, my strategy remains to sell a portion of an equity that trades into its Sell Half Range.  
           
            One man’s opinion (medium):

    News on Stocks in Our Portfolios
 
General Dynamics (NYSE:GD) declares $0.93/share quarterly dividend, in line with previous.

Economics

   This Week’s Data

      US

            Weekly jobless claims fell 1,000 versus expectations of a 4,000 increase.

     International

First quarter EU economic growth slowed to its lowest level since Q3 2016.

April German factory orders declined 2.5% versus estimates of a rise of 08%.

    Other

            More on the solvency of the social security trust fund (medium):

            More on the Italian PM’s inaugural statement (medium):

            More on the ECB’s meeting next week (medium):

            More on the US employment stats (medium):

            Merkel warns of turmoil at upcoming G7 meeting (medium):

What I am reading today

           

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