The Morning Call
6/22/18
The
Market
Technical
The Averages
(DJIA 24461, S&P 2749) reversed its daily pattern---trading down early on then
sinking further through the day. Volume declined;
breadth continued weak---but is getting oversold. The Dow finished below its 100 day moving
average for a second day (now support; if it remains there through the close today,
it will revert to resistance) while the S&P remained above (now support). Both ended above their 200 day moving
averages (now support). The Dow is in a
short term trading range, the S&P in a short term uptrend.
The VIX jumped 14 ½ %, closing
below its 100 day moving average (now resistance) but above its 200 day moving
average (now resistance; if it remains there through the close next Tuesday, it
will revert to support). It also finished
above the upper in a short term trading range (which is the second time in June). It looks like it bottomed in early June.
The long
Treasury was up ½ %, closing above its 100 day moving average and the lower boundary
of its long term uptrend but below its 200 day moving average and remained in a
short term downtrend.
The dollar was down
¼ % on huge volume, but still ended well above both moving averages and in a
short term and very short term uptrends.
GLD was down
again, finishing below its 100 and 200 day moving averages and in a short term downtrend.
Bottom line: the
Dow continued its[S1]
challenge of its 100 day moving average which, itself is rolling over. If successful, it would be the first technical
damage done since trade worries became a primary concern. But it is way too soon to become negative
much less alter my assumption that long term stocks are going up.
On the other
hand, bonds and the dollar again traded at odds with other; and gold declines
no matter what the news or the pin action in other indicators. In short, we are
getting no directional information from these indices.
Fundamental
Headlines
Yesterday’s
economic data did not make good reading: the May leading economic indicators
were less than expected and the June Philly Fed manufacturing index was
dramatically short of estimates; the good news was that weekly jobless claims
were less than forecast.
The
other economic news was the release of the latest Fed stress test which
pronounced the major banks’ capitalizations strong and could withstand a severe
economic shock it assumed would be even worse than in the prior test.
Bottom line: I
was a bit surprised that investors ignored overtures on trade from China and
the EU. Granted they were very not well
publicized and very low key. But they
were still better than a sharp stick in the eye.
***overnight,
the EU imposed tariffs on $3.2 billion US goods. But some in the administration are urging a
reasoned response to the Chinese offer to negotiate.
Just as important
in terms of the economic implications is the continuing irregular dataflow. This week’s stats illustrate just how uneven
it is. True, I acknowledge that second
quarter numbers are improvement over those of Q1. But I still think that they portray an
economy not nearly as strong as consensus and more importantly point to
continued sluggish growth which will not be aided by the growing debt in all
sectors of the economy. If I am correct,
equity valuations are too high and investors need to have cash in their
portfolios.
The
performance of stocks versus bonds (medium):
The
latest from David Rosenberg (medium):
Trade
war versus earnings (short):
OPEC’s
meeting ends today which will include the announcement of any policy changes.
News on Stocks in Our Portfolios
Economics
This Week’s Data
US
May
leading economic indicators rose 0.2% versus forecasts of up 0.3%.
International
The
June flash EU composite PMI was 54.8 versus estimates of 53.9; manufacturing
was 55.0, in line; and services was 55.0 versus 53.7.
Other
An
interesting study of the prices of soup and oil (short):
Hotel
occupancy rates declined year over year (short):
What
I am reading today
Investment thoughts on
size and time horizon (medium):
Why diversification is so important
(medium):
Cryptocurrencies take another hit
(medium):
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