The Morning Call
8/7/18
The
Market
Technical
The Averages
(DJIA 25502, S&P 2850) had another good day but on lower volume and
unimpressive breadth. They remain strong
technically and the Dow is back above its June high. However, (1) its 100 DMA is right on its 200
DMA and moving lower and (2) VIX remains range bound [though it is now at the
lower end of that range] since mid-July between its 200 DMA and the lower
boundary of its short term trading---which is providing no directional
information.
Counterpoint:
And
this from Morgan Stanley (medium):
The major
technical story continues to be the pin action of TLT (increase in interest
rates). Yesterday, despite a strong
intraday bounce, it once again closed right on its 100 DMA (leaving that
challenge in question) and the lower boundary of its long term uptrend (leaving
that challenge in question). That keeps
both challenges on hold but does not negate them. A plus day today, however, will negate them;
a down day will re-start the challenge clock.
Yesterday’s
T bill auction the sloppiest in seven years (medium):
The
dollar continued to rally, ending above its late June high thereby
re-establishing a very short term uptrend.
That only improves its already strong technical position and appears to
be confirming a move to higher rates.
GLD was down again, also pointing towards higher rates.
Bottom
line: the Averages remain quite strong
technically speaking, though some minor cracks exist. The assumption remains that they are going to
challenge their all-time highs.
TLT’s
performance has potentially important negative fundamental as well as technical
implications. Despite the indeterminate
close Friday/yesterday, my time and distance discipline is still in
effect. We just have to wait until we
get follow through in either direction.
That said, the dollar and GLD are suggesting that they were anticipating
higher interest rates. Stay tuned.
Fundamental
Headlines
No
economic releases yesterday. Indeed,
this will be a very slow week for stats.
Overseas, June German factory orders fell 4.0%.
Also
not much new in the headlines either.
Most of the media/investors’ day was spent mulling the weekend news
(i.e. the artillery barrage between and US/China over trade and the latest steps
on Iranian sanctions). But there is
nothing to add to yesterday’s links.
For
the pessimists on trade (medium):
Bottom
line: this should be a very slow week for economic/fiscal/monetary data
(everyone is on vacation). Of course,
saying that probably means someone will lob a bomb. Absent that, given investors’ positive mood,
stocks will likely edge higher on no news.
The
latest from John Mauldin (medium):
News on Stocks in Our Portfolios
Revenue
of $4.46B (+10.4% Y/Y) in-line.
Economics
This Week’s Data
US
International
June
German industrial production declined 0.9% versus estimates of down 0.5%; in
addition, its trade balance declined.
Other
Global
growth eases in July (short):
For
the optimists on the economy (medium):
July rail car loadings
continued to rise (short):
Germany and the Russian
pipeline (medium):
What
I am reading today
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