Tuesday, August 7, 2018

The Morning Call--This should be a very slow week---absent someone dropping a bomb


The Morning Call

8/7/18

The Market
         
    Technical

The Averages (DJIA 25502, S&P 2850) had another good day but on lower volume and unimpressive breadth.  They remain strong technically and the Dow is back above its June high.  However, (1) its 100 DMA is right on its 200 DMA and moving lower and (2) VIX remains range bound [though it is now at the lower end of that range] since mid-July between its 200 DMA and the lower boundary of its short term trading---which is providing no directional information.

            Counterpoint:

            And this from Morgan Stanley (medium):

The major technical story continues to be the pin action of TLT (increase in interest rates).  Yesterday, despite a strong intraday bounce, it once again closed right on its 100 DMA (leaving that challenge in question) and the lower boundary of its long term uptrend (leaving that challenge in question).  That keeps both challenges on hold but does not negate them.  A plus day today, however, will negate them; a down day will re-start the challenge clock.

            Yesterday’s T bill auction the sloppiest in seven years (medium):

            The dollar continued to rally, ending above its late June high thereby re-establishing a very short term uptrend.  That only improves its already strong technical position and appears to be confirming a move to higher rates.  GLD was down again, also pointing towards higher rates.

            Bottom line:  the Averages remain quite strong technically speaking, though some minor cracks exist.  The assumption remains that they are going to challenge their all-time highs.
           
            TLT’s performance has potentially important negative fundamental as well as technical implications.  Despite the indeterminate close Friday/yesterday, my time and distance discipline is still in effect.  We just have to wait until we get follow through in either direction.  That said, the dollar and GLD are suggesting that they were anticipating higher interest rates.  Stay tuned.
                           
    Fundamental

       Headlines

            No economic releases yesterday.  Indeed, this will be a very slow week for stats.  Overseas, June German factory orders fell 4.0%.

            Also not much new in the headlines either.  Most of the media/investors’ day was spent mulling the weekend news (i.e. the artillery barrage between and US/China over trade and the latest steps on Iranian sanctions).  But there is nothing to add to yesterday’s links.

            For the pessimists on trade (medium):

            Bottom line: this should be a very slow week for economic/fiscal/monetary data (everyone is on vacation).  Of course, saying that probably means someone will lob a bomb.  Absent that, given investors’ positive mood, stocks will likely edge higher on no news.   

            The latest from John Mauldin (medium):


    News on Stocks in Our Portfolios
 
Emerson Electric (NYSE:EMR): Q3 EPS of $0.88 beats by $0.02.
Revenue of $4.46B (+10.4% Y/Y) in-line.

Economics

   This Week’s Data

      US

     International

            June German industrial production declined 0.9% versus estimates of down 0.5%; in addition, its trade balance declined.

    Other

            Global growth eases in July (short):

            For the optimists on the economy (medium):

                July rail car loadings continued to rise (short):

                Germany and the Russian pipeline (medium):

What I am reading today

           

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