The Morning Call
6/6/17
The
Market
Technical
The indices
(DJIA 21184, S&P 2436) rested yesterday.
While off, it was not by much.
Nonetheless, that left the Dow below its recent high; meaning that it is
still not confirming the S&P’s break above its comparable level. That leaves the question open as to which of
these divergent trends will change direction and confirm the other; but I still
believe that the Dow will ultimately trade above its high and the Averages will
make a run at the upper boundaries of their long term uptrends (now circa
24198/2753). Volume fell; breadth weakened.
The VIX (10.1) was
up 3 ¼ %, ending below the lower boundary of its intermediate term trading
range for the third day (if it remains there through the close today, it will
reset to a downtrend) but finishing back above the lower boundary of its long
term trading range, voiding Friday’s break.
The long
Treasury fell slightly, closing back below its 200 day moving average, voiding
Friday’s break but remains above its 100 day moving average and in a very short
term uptrend.
The dollar rose,
but remains in a very short term downtrend and below its 100 and 200 day moving
averages.
GLD rose,
closing above its 100 and 200 day moving averages, in a very short term uptrend
and is nearing the upper boundary of its short term trading range.
Bottom
line: TLT, UUP, GLD investors are all betting
their money on a weaker economy and lower rates. That is somewhat at odds with the equity
narrative; but I am not sure that means anything in the current ‘all news is good
news’ atmosphere. My assumption remains
that the indices are headed higher.
Stocks
first five month performance suggest more gains ahead (short):
Fundamental
Headlines
Yesterday
was a busy day for economic releases.
Indeed, it incorporated one half of all the reports this week; and they
were negative, though the magnitude of the misses were small: the May Markit
services PMI, the May ISM nonmanufacturing index were slightly below forecast;
April factory orders were negative but in line; and the bright spot was revised
first quarter nonfarm productivity and unit labor costs which improved versus their
first reading.
Overseas,
the May EU Markit composite PMI was unchanged from April; the Chinese services
PMI was better than expected while the UK services PMI was worse; the World
Bank forecast 2017 global growth of 2.7% and for 2018 2.9%
It
appears that this will be a news heavy week with Thursday as a standout: UK
elections, an ECB meeting and Comey’s testimony. Each had related events in the headlines
today: another terrorist attack in London and Trump indicating that he would
not invoke executive privilege in the Comey hearings. Other items that bear watching include:
(1)
Spain’s sixth largest bank appears on the brink of
bankruptcy,
(2)
turmoil among the Gulf States with the state
sponsorship of terror as the driving issue; that, in turn, is having an
economic impact as gold and Treasuries move higher and oil prices drop,
Bottom line: there was nothing in the numbers to suggest
any change in our economic outlook. This
will be an active week on the political front; but given investors present inclination
to view all news as good news, it seems a waste of time to assume anything but
a positive reception whatever occurs.
My thought for
the day: One of the first decisions you need to
make in the process of building an investment portfolio is whether you will be
an active or a passive investor. In doing so, the active versus passive
decision comes down to the amount of time you are willing or able to put into
your investment process and the degree of stress you can handle in making
portfolio decisions.
Investing for Survival
Expert
predictions.
News on Stocks in Our Portfolios
Economics
This Week’s Data
The
May Markit services PMI was reported at 53.6 versus expectations of 54.0.
The
May ISM nonmanufacturing index came in at 56.9 versus estimates of 57.0
April
factor orders were down 0.2%, in line.
Other
The
latest from Nouriel Roubini (medium):
Politics
Domestic
Paris Accord was
a ‘sham’ until Trump dumped it (medium):
International War Against Radical
Islam
An
assessment of the recent US anti-missile test (medium):
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