The Morning Call
8/8/18
The
Market
Technical
The Averages
(DJIA 25628, S&P 2858) had another good day but, again, on lower volume. Breadth improved. They remain strong technically and the Dow is
back above its June high. However, its 100 DMA is right on its 200 DMA and
moving lower. In addition, the VIX broke below the lower boundary of its short
term trading range---a plus for stocks (if it remains there through the close
on Thursday, it will reset to a downtrend).
The major
technical story continues to be the pin action of TLT (increase in interest
rates). Yesterday, it once again fell
below its 100 DMA and the lower boundary of its long term uptrend. That restarts our time and distance
clock. If it remains below its 100 DMA (now
support) though the close today, it will revert to resistance and below the
lower boundary of its long term uptrend through the close on Friday, it will
reset to a trading range.
And the latest auction
(short):
The
dollar fell three cents but remains in a strong technical position and appears
to be confirming a move to higher rates.
GLD was up but is in a solid downtrend which also points towards higher
rates.
Bottom
line: the Averages remain quite strong
technically speaking. The assumption remains that they are going to challenge
their all-time highs with the S&P only points away.
TLT’s
resumed its challenge of both the 100 DMA and, far more importantly, the lower boundary
of its long term uptrend. If successful,
its pin action has potentially important negative fundamental as well as
technical implications. The dollar and
GLD are pointing towards higher interest rates.
Yesterday
in the charts.
Fundamental
Headlines
Two
datapoints were released yesterday: month to date retail chain store sales
improved over the prior week while June consumer credit growth was well below
estimates.
***overnight,
China readies tariffs on $16 billion US goods.
It also reported July exports and imports were both above forecasts.
Other
than that, the only headline grabbing news of the day was Elan Musk’s statement
that he might take Tesla private.
Bottom
line: as I noted yesterday, given the upward bias in investor sentiment, a slow
news week will likely mean higher prices.
The Tesla announcement only adds too investor elation.
That said, the
higher stock prices go, the more overvalued they become. Cash is an important asset to own in this
environment.
As
of the close last night, 79% of S&P companies have beat earnings
expectations.
What
you pay for a stock matters (medium):
Buybacks. The next $1 trillion milestone (short):
News on Stocks in Our Portfolios
Economics
This Week’s Data
US
Month
to date retail chain store sales rose faster than in the prior week.
June
consumer credit rose $10.2 billion versus forecasts of up $16.0 billion.
Weekly mortgage
applications fell 3.0% while purchase applications were down 2.0%.
International
Other
Revisions
in US economic data are upbeat (medium and a must read):
US
heavy truck sales up year over year (short):
What
I am reading today
Some history on Gen. Nathanael
Greene (medium):
Overcoming confirmation bias
(medium):
The Rosetta image of its target
comet (medium):
This is what our colleges are turning
out (medium):
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for Survival’s website (http://investingforsurvival.com/home)
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