An Analysis of Daily Events that Impact Your Money
Wednesday, June 27, 2018
The Morning Call--Was this chapter 2 in the Art of the Deal?
The Morning Call
(DJIA 24283, S&P 2723) stabilized yesterday after Monday’s trashing. Volume declined and breadth was mixed. The Dow finished below its 100 day moving
average (now resistance) while the S&P remained above (now support). The DJIA ended right on its 200 day moving
average (again) while the S&P remains well above its MA (both now support). The Dow is in a short term trading range, the
S&P in a short term uptrend.
The VIX fell 8 %, closing
below its 100 day moving average (now resistance), above its 200 day moving
average for a second day (now resistance; if it remains through the close on
Thursday, it will revert to support.
Remember it has see sawed above and below this MA over the last three weeks)
and within a short term trading range.
It looks like it bottomed in early June.
Treasury was up, ending above its 100 day moving average and the lower boundary
of its long term uptrend but below its 200 day moving average (though it is getting
closer) and remained in a short term downtrend. It seems trapped in the range defined by those
The dollar was up
½ %, finishing back above the lower boundary of its very short term uptrend,
negating Monday’s break. It remains above
both moving averages and within a short term uptrend.
Gold was down ½ %,
ending below its 100 and 200 day moving averages and in a short term downtrend.
Bottom line: the
DJIA’s pin action continues to be sloppy on a very short term basis---it is
below its 100 day moving average, closed right on its 200 day moving
average. Meanwhile, the S&P remains
above both its moving averages and in uptrends across all timeframes. The only negative for the S&P is that its
100 day moving average is rolling over (along with the Dow’s). Until the S&P is in sync with the Dow, it
is too soon to get negative.
On the other
hand, bonds and the dollar finally got back on the same page, if you view them
as a safety trade. Gold, which is
normally a safety trade, continues to be just a lousy trade.
economic releases were negative: month to date retail chain store sales, the
April Case Shiller home price index and June consumer confidence were below
expectations while the June Richmond Fed manufacturing index was above.
remains front and center though the news was a bit more sanguine:
appears to be backing off some threats on Chinese theft of IP in light of
proposed changes in CIFUS---though I have found nothing specific about what
those changes are. (medium):
noted in yesterday’s Morning Call that while the outcome of Trump’s trade policy
(which could be a negative) is still an unknown, the impact of the rapidly
increasing of US debt (which is known) will likely be a negative for growth. Here is an IMF study supporting that
thesis. Having said that, 90% of the IMF’s
output is bullsh*t.
line: yesterday’s trade headlines are a great example how volatile the rhetoric
on this issue is becoming. And given the
overnight news, all that we may have been witnessing is another chapter in the ‘art
of the deal’. So, I just don’t see how
investors can start discounting of an unknown outcome to any meaningful
degree. As a result, the VIX may go nuts;
but I think that it will be directionless.
If that proves
correct, then absent some other event, stock valuations should remain near
current levels. I look at this as a
blessing for those who have not yet raised cash.
News on Stocks in Our Portfolios
FactSet Research Systems (NYSE:FDS):
Q3 EPS of $2.18 beats by $0.05.
of $339.9M (+8.9% Y/Y) in-line.
Mastercard (NYSE:MA) declares $0.25/share quarterly dividend, in line with
General Mills (NYSE:GIS):
Q4 EPS of $0.79 beats by $0.07.
of $3.89B (+2.1% Y/Y) in-line.
General Mills (NYSE:GIS) declares $0.49/share quarterly dividend, in line with
This Week’s Data
to date retail chain store sales grew more slowly than in the prior week.
April Case Shiller home price index rose 0.2% versus expectations of +0.5%.