The Morning Call
7/26/18
The
Market
Technical
The Averages
(DJIA 25414, S&P 2820) spiked late in the day on US/EU trade news (see
below) on slightly better breadth but lower volume. The Dow continued to trade above its 100 day
moving average (now support), above its 200 day moving average (now support)
and within a short term trading range.
The S&P ended above both moving averages, in uptrends across all
timeframes. Some cognitive dissonance
continues: (1) the Dow’s 100 day moving average is very close to crossing below
its 200 day moving average and (2) the S&P has made a fifth successively higher
high while the Dow failed---but is now challenging its June high. The S&P is clearly on its way to its all-time
high; will the Dow be far behind?
VIX fell another
1 ¾ %, but, like Tuesday’s pin action, was a surprisingly small decline given
the indices’ performance. It remains
below both moving averages and in a narrow trading range near the lower
boundary of its short term trading range.
It doesn’t seem to want to challenge that lower boundary.
The long
Treasury was down fractionally. It
managed to close above its 100 day moving average (now support), but below its
200 day moving average for a third day (now support; if it remains there
through the close today, it will revert to resistance). It remains caught between the declining upper boundary
of its short term downtrend and the rising lower boundary of its long term
uptrend; though, at present, it is closer to the latter. A break of this developing pennant pattern
has directional import.
The
dollar was down ½ %, but still ended above both moving averages and in a short
term uptrend but remains below its June high.
Gold
was up ½ %, likely reflecting investor reaction to the weaker dollar. It finished below both moving averages (its
100 day moving average has now crossed below its 200 day moving average---not a
technical plus) and in a short term downtrend.
Its pin action suggests that it will challenge the lower boundary of its
intermediate term trading range (roughly 10 points lower).
Bottom
line: though the indices were up, but investors
didn’t have the benefit of a full understanding of the US/EU trade statement
which wasn’t revealed until after the Market close. So I think any comment about yesterday’s
Market action would be meaningless. We
will know more about investor reaction by the close today.
Ditto with the price
performances of TLT and UUP which will be impacted by any (potential)
agreement.
GLD bounced
reflexively to the weaker dollar but again, let’s see what today brings.
Yesterday
in the charts:
Fundamental
Headlines
Yesterday’s economic releases
did not make for good reading: weekly mortgage and purchase applications
declined and June new home sales were well off the mark.
Trade remains the Market’s
focus. The biggest news of the day was
US/EU de-escalation of their current trade dispute which consisted primarily of
a change to a less combative posture. The
feel good news conference between Trump and Juncker was filled with promises to
pursue objectives that would lower tariffs and increase trade. They included (1) working toward zero tariffs
on industrial goods [no mention of autos], (2) resolving the aluminum/steel
tariffs and retaliatory tariffs, (3) reforming the WTO to include measures
against the theft of intellectual property and (4) the EU to buy more US LNG
and soybeans. In short, neither parties
made concessions but a cease fire and the intention to negotiate has been
announced.
Two questions occur to me,
(1) is this a victory for Trump (and the art of
the deal strategy)? And we have no way
of judging that until we know the results.
My only observation is that Europeans are saying that they are now willing
to consider altering the US/EU trade relations which is more than they have
done in the past,
(2) what effect, if any, will it have on
negotiations with China and our NAFTA partners.
Given the size of the total US/EU economies viz a viz the rest of the
world, no one is going want to be cut out of a new trade regime [if it
happens].
Much of investor attention prior
to the US/EU announcement was on China, in particular, exactly what it is doing
with respect of its currency and what impact that will have on its dispute with
the US.
More on China’s currency
war (medium):
And even more (medium):
A weak dollar will not make
America great again (medium):
Trade
war starting to impact earnings (medium):
The
other good news for all you lovers of government spending/deficits/debt---the
senate has apparently agreed on a combining two bills that would increase
domestic and defense spending (medium):
And
a bonus link on the egregious earmarking of the GOP congress (medium):
Bottom
line: we know that Trump is likely going to be tweeting like crazy about the
agreement with the EU being a big win.
And it may prove to be; but hopefully he will be circumspect and not
make it look like he muscled them because that will probably only harden their position. To be sure, nothing has been accomplished with
respect to a fairer trade regime and the path there is likely to be a rough
one. So everything is not coming up
roses. On the other hand, the current
tariffs seem likely to be reversed and the rhetoric toned down; and that is a
plus.
In
the meantime, our political class continues to spend our money like drunken
sailors. Given the resources that will be
usurped to service this growing level of debt, that is not a plus.
News on Stocks in Our Portfolios
Revenue
of $1.35B (+13.4% Y/Y) beats by $20M.
Revenue
of $9.19B (+19.8% Y/Y) beats by $120M.
Revenue
of $24.26B (+5.2% Y/Y) beats by $240M.
Revenue
of $17.46B (+9.6% Y/Y) beats by $130M.
Revenue
of $8.9B (-8.3% Y/Y) beats by $360M.
Revenue
of $5.6B (+5.7% Y/Y) beats by $410M.
Economics
This Week’s Data
US
Weekly mortgage applications
fell 0.2% while purchase applications were down 1.0%.
June new home sales fell 5.2%
versus estimates of down 3.0%.
International
Other
I
talk a lot about the current monetary policy causing the mispricing and
misallocation of assets. Here is an
economist’s explanation for this phenomena but in layman’s terms (medium and a
must read):
More
on the BOJ purported tightening of monetary policy (medium):
Pretty
soon the BOJ will own Japan (short):
Powell
on cryptocurrencies (short):
More on Brexit (medium):
The potential impact on
oil prices from an environmental regulation due to go into effect in 2020
(medium):
What
I am reading today
Every law is violent (short):
Thoughts on being a millennial
(short):
Thursday morning
humor---ode to a student:
If you can self-define
as something you’re not,
And crawl into victimhood, however well-bred
And spew out tendentious sub-teenage rot
And wear a vagina on top of your head,
And whine like a ninny, inside your safe space,
When the real world intrudes on the crap you’ve averred,
Then apply to our college – we’ll give you a place,
For about £30k). And you’ll get a third.
And crawl into victimhood, however well-bred
And spew out tendentious sub-teenage rot
And wear a vagina on top of your head,
And whine like a ninny, inside your safe space,
When the real world intrudes on the crap you’ve averred,
Then apply to our college – we’ll give you a place,
For about £30k). And you’ll get a third.
Visit Investing
for Survival’s website (http://investingforsurvival.com/home)
to learn more about our Investment Strategy, Prices Disciplines and Subscriber
Service.
No comments:
Post a Comment