The Morning Call
6/20/19
The
Market
Technical
The Averages (26504,
2926) were up again yesterday, maintaining the momentum toward a rendezvous
with their all-time highs (26656, 2942).
Both ended above their 100 and 200 DMA’s (now support). However, both indices made a gap up open on
Tuesday ---which will need to be filled.
Volume was again to the downside and breadth was mixed.
VIX was down 5½%, making yesterday another of
the many schizophrenic sessions of late, i.e. it declined much more than would
normally be associated with a 38 point increase in the Dow. In doing so, it finished below its 100 DMA
(now support; if it remains there through the close on Friday, it will revert
to resistance) and set a very short term downtrend.
TLT rose 1/8 % on
volume, closing above both MA’s (now support), in a very short term uptrend and
is now forty-one cents away from its twenty year high.
The dollar fell
½%, also on volume, but remained in a short term uptrend and above both
moving averages (now support). However, it still has that gap up open lower
down---which, as you know, I expect will need to be filled.
GLD increased 5/8
%. also on volume, finishing in a short term uptrend, above both MA’s (now
support) and remains near the upper boundary of its intermediate term trading
range.
Bottom line:
the Averages are on track to challenge their all-time highs---which if
you believe the technical saw that there are no triple tops, is most likely to
be successful. However, 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 all
pointing to recession/or the need for a safety trade), relatively weak breadth
and a VIX that is signalling extreme complacency---though that could be
changing.
Wednesday in the
charts.
Fundamental
Headlines
One minor stat
yesterday: weekly mortgage/purchase applications declined.
Overseas, April EU
construction output and the May Japanese
trade deficit were better than expected;
the May UK CPI was in line; and the May German and UK PPI’s and the June
UK industrial orders index were below estimates.
Latest business
cycle risk report.
Counterpoint.
Of course, the
major headline of the day was the FOMC statement in which it (1) left rates
unchanged, but (2) removed the word ‘patient’ from the statement [dovish] and
(3) said that uncertainties in the economic outlook have increased [dovish].
The key statement:
... uncertainties about this
outlook have increased. In light of these uncertainties and muted inflation
pressures, the Committee will closely monitor the implications of incoming
information for the economic outlook and will act as appropriate to sustain the
expansion, with a strong labor market and inflation near its symmetric 2
percent objective
Post FOMC
statement.
The ‘dot plot’.
Trump should be careful what he wishes for.
***overnight,
Bank of England leaves rates unchanged.
Bottom line: the economic data is
not improving; and while that doesn’t mean recession, it is not as healthy as
the Fed assumes---and the bond, dollar and gold markets are saying exactly
that. To be sure, those investors could
be wrong; but my inclination is to believe a market of savvy investors over a
bunch of academics with a flawed economic model.
Of course, even if the Fed is
wrong, it just means that any surprises will be to the more dovish side which
under the current paradigm is a plus for the equities. But what remains to be seen is that if the
economy is weaker than the Fed assumes, it subsequently eases faster than is
currently expected but that has no impact on the economy, what does Mr. Market
do?
***overnight,
Iran shoots down US drone.
News on Stocks in Our Portfolios
Revenue of $11.14B (+1.2% Y/Y) beats by $210M.
Economics
This Week’s Data
US
Weekly
jobless claims fell 6,000 versus estimates of a 2,000 decline.
The
June Philadelphia Fed manufacturing index came in at 0.3 versus consensus of
11.0.
The
Q1 trade deficit was $130.4 billion versus expectations of $125.0 billion.
International
The
April Japanese all industry activity index was reported at 0.9 versus
projections of 0.7.
May
UK retail sales dropped 0.5%, in line; ex fuel, the reading was -0.3% versus
-0.4%.
Other
Debt
and deficits are worse than ever.
Liquidity is an increasing
problem in the Chinese financial system.
What
I am reading today
50% of crimes happen in
2% of America.
Muni bonds mid-year outlook.
Press your luck.
How to make better and quicker
decisions.
Quote of
the day.
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