Tuesday, June 25, 2019

The Morning Call--Fed speak today, G20 this weekend and earnings season about to start



6/25/19

The Market
         
    Technical

The Averages (26727, 2945) were mixed (Dow up, S&P down) yesterday, finishing above the upper boundaries of their short term trading ranges (all-time highs) for a third day, resetting to uptrends.  Both are overbought, though less so.  More sideways to down pin action would be normal; and remember, both indices have to fill those gap up opens made  on last Tuesday.  Volume  was terrible; breadth mixed.

 VIX was down 1 %.  It ended above its 100 DMA but is still in a very short term downtrend.

TLT rose ¾%, closing above both MA’s (now support), in a very short term uptrend and is again nearing (less than a point) its twenty year high. 

The dollar fell 1/8% on monster volume.  But it ended in a short term uptrend, above its 200 DMA (now support) and still needs to close Thursday’s gap down open.  However, it finished below its 100 DMA (now support) for a second day (if it remains there through the close today, it will revert to resistance).

GLD was up another 1 ½ %, also on huge volume, finishing in a short term uptrend, above both MA’s (now support) and above the upper boundary of its intermediate term trading range.  If it remains there through the close on Thursday, it will reset to an uptrend.  However, there is a major gap up open lower down---which needs to be filled.

Bottom line:  the Averages have reset to uptrends (and broken above their all-time highs) which sets the stage for an assault on the upper boundaries of their uptrends.  That said, on a very short term basis, they still need to close Tuesday’s gap up opens.

Longer term, it is remains disconcerting that volume is low (versus high volume in bonds, the dollar and gold which are pointing to recession/or the need for a safety trade), relatively weak breadth, the lack of confirmation (of all time highs) from most other indices (NASDAQ, Russell, transports, etc) and a VIX that has been acting unconventionally for the last couple of weeks.

Monday in the charts.

            Is Bitcoin going higher?

    Fundamental

       Headlines
           
            Yesterday’s data was disappointing:   the May Chicago Fed national activity index and the June Dallas Fed manufacturing index weren’t just bad, they were awful.

            Overseas, the April Japanese leading economic indicators came in slightly above estimates.

            It was a generally quiet day with most of the headlines centered on the aftermath of Trump’s decision not to bomb Iran:

Trump threatens more sanctions on Iran; however, there is not much left to sanction.
      
            Except the Ayatollah.

                Iran’s response.

                Trump: why is the US guarding Middle East oil shipments when it doesn’t need the oil?

                On the other hand.

            Another concerning headline that the Market seems to be ignoring---the Chinese banking system is freezing up.

                And Trump’s newest threat won’t help.
               
               Bottom line:  the economic data is not improving.  The question is will it show up in second quarter earnings---which are about to begin being reported.

               We will know more about the US/Chinese trade dispute by this coming weekend; though as you know, I see no incentive for the Chinese to comply with US demands for reforms in their industrial/IP theft policies until the pain is excruciating and maybe not even then---which means in the short term, Trump either folds or there is no deal.
              
               Of course, the stock market/Fed co-dependency is the major factor in equity prices; and the continued market advance in the face of lousy economic, trade and Middle East headlines is a testament to that.  Until that paradigm changes, the trend in stock prices will likely remain to the upside.  Six Fed officials are scheduled to speak today.

Saving and investing.

    News on Stocks in Our Portfolios
 
FactSet Research Systems (NYSE:FDS): Q3 Non-GAAP EPS of $2.62 beats by $0.25; GAAP EPS of $2.37 beats by $0.17.
Revenue of $364.53M (+7.2% Y/Y) beats by $5.28M.

Boeing (NYSE:BA) declares $2.055/share quarterly dividend, in line with previous.

AbbVie to buy Allergan.

Economics

   This Week’s Data

      US

            The June Dallas Fed manufacturing index was -12.1 versus consensus of -1.0.

     International

    Other

            The sorry state of political economics.

            The case of the missing inflation.

            I am not sure I believe this author’s conclusion, but he does point to how the US solves its massive debt problem.  It is sort of a corollary to Modern Monetary Theory.

            Why lower oil prices are not an unmitigated positive of the US economy but higher prices maybe.

            Loan delinquency rates on the US.

What I am reading today
              
             The discipline for improving your business.  The comments are directed at traders but they apply to all businesses.
           
           
                        15,000 Mexican troops deployed at US border.




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