The Morning Call
7/5/16
The
Market
Technical
Tuesday Morning Chartology
Notwithstanding
last week’s powerful rally, note that the S&P has yet to surpass the upper
boundary of a very short term downtrend connecting the early and mid-June
highs. This not to say that it won’t; it
is to say that for the moment, the S&P remains in a very short term
downtrend and a short term trading range.
I would note that this burst of strength was on low volume. Also note that the TLT and GLD (signs of potential
trouble) are making new highs, while stocks have not.
How
do you argue with a chart like this?
Uptrends across the board, meaning momentum to lower interest
rates. With TLT’s dash through the upper
boundary of its short term uptrend, it is getting overbought.
Last
week, GLD negated a two day break above its intermediate term trading range,
then soared above it for a second time; if it finishes there today the
intermediate term will re-set to an uptrend.
In a Subscriber Alert, the Aggressive Growth Portfolio Added to its GDX
position.
The latest from Jim Grant
(7 minute video):
With
the sharp snapback last week, it looks like the VIX is going to have another go
at the lower boundary of its short term trading range. At the very least, it suggests a bit more
upside in stocks.
Fundamental
A
lot of economic data was released last week and it was basically mixed
(neutral). Above estimates: the June PMI
flash services and manufacturing indices, the June Dallas Fed manufacturing
index, first quarter revised GDP and corporate profits, June consumer
sentiment, weekly jobless claims, the June Chicago PMI and the June ISM
manufacturing index; below estimates: the May US trade deficit, month to date
retail chain store sales, the June Richmond Fed manufacturing index, weekly
mortgage and purchase applications, May personal income, June light vehicle
sales and May construction spending; in line with estimates: June personal
spending.
The
primary indicators were tilted to the positive side: first quarter GDP (+),
first quarter corporate profits (+), the June ISM manufacturing index (+), May
personal income (-), May construction spending (-) and June personal spending
(0). Of note is the consistently more
upbeat data from the manufacturing sector which to date has been a major source
of weak to negative growth. Of course,
this is the first week that we have witness such meaningful rebound in the
data; so more is needed before any definitive conclusion can be made about
improvement in this sector.
The
score is now: in the last 41 weeks, ten have been positive to upbeat, twenty
nine negative and two neutral. While
these numbers in aggregate point at recession, the past nine weeks stats have
see sawed back and forth, raising the question as to whether the economy is
attempting to stabilize at an even slower rate of growth than before. At the moment, I believe the odds are low
that this is occurring; but I leave it as a possibility.
The
central banks helped investor sentiment last week as both the ECB and the Bank
of England announced that they were ready, willing and able to pour as much
money into the system as needed to stabilize in negative fallout from the
Brexit. It would seem that QEInfinity
continues to excite the investment boys.
***overnight,
the June EU Markit flash composite PMI came in at 53.1 versus expectations of
52.8; the June China Markit services PMI was reported at 52.7 versus estimates
of 51.2.
Finally,
helping out GLD and TLT but being largely ignored by the ‘everything is
awesome’ crowd, the Italian banks appear to be in crisis mode.
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Domestic
International War Against Radical
Islam
This
is just what the doctor ordered---more military buildup in the Middle East
(medium):
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