The Morning Call
6/4/19
The
Market
Technical
The Averages
(24819, 2744) turned in a mixed day (Dow up, S&P down) which included a lot
of volatility. Volume was flat and
breadth mixed. Both are in very short
term downtrends and below their 100 DMA’s.
The DJIA’s 200 DMA has reverted to resistance; the S&P ended below
its MA for a second day (if it remains there through the close on Wednesday, it
will revert to resistance). As I noted yesterday, the most significant technical
development is the setting of a double top by both indices. So, the assumption is that the direction is
lower; the question is its extent.
VIX was up another 1 ½ %, finishing in a very
short term uptrend and above both MA’s (now support). I continue to believe that its recent move up
has been relatively subdued, indicating to me that the stock guys are still
hopeful that this decline will be over soon.
TLT rose ½ % on
big volume, ending above both MA’s (now support), in a very short term uptrend
and is now within a point of a 20 year high.
However, it is very overbought and I expect that high to offer a considerable
resistance.
Inverting yield
curve.
The dollar fell another
½ % also on big volume but remains in a short term uptrend, above both moving averages (now support) and filled one of the
two lower gap up opens. The bad news is that it has broken below the lower
boundary of its very short term uptrend; if it remains there through the close today,
the trend will be voided. But it had to
do that in order to close those two gap opens. So, I am less concerned than I might
otherwise be.
Who said the Fed
wasn’t taking orders from the Market?
GLD spiked another
1 ½ also on high volume. It ended within
a short term uptrend, above its 200 DMA (now support) and above its 100 DMA for
a second day (if it remains there through the close today, it will revert to
support). In the process, it made a
second gap up open; so, that makes two that need to be filled.
Bottom line: it
sure appears like investors are facing a big double top in the Averages. There still may be an attempt at a rally; but,
as I noted yesterday, unless it shows real strength in the move up, my
assumption that we will see lower price levels.
What is somewhat
surprising to me is that volume is going nuts in UUP, TLT and GLD, implying
that, at least, some investors have a strong opinion about the need for safety;
while volume in equities is low. Perhaps,
investors are just hedging their equity bets instead of lightening up.
Monday in the charts.
Fundamental
Headlines
Yesterday’s stats
were not impressive: April construction spending, the May manufacturing PMI and
the May ISM manufacturing index were all lower than anticipated.
Overseas the
results were better: the May
Japanese YoY manufacturing PMI and the May Chinese Caixin manufacturing PMI were
better than expected; the May EU manufacturing PMI was in line but still in
contraction; and the May UK manufacturing PMI was really poor.
I am not sure what
Trump is thinking but he is on a tear and his actions are much less business
friendly. He seems to be testing just
how disruptive he can be before Market really starts to tank. The main headline on investors’ minds
yesterday was his bid to raise tariffs on Mexico. While I agree with his move to ‘encourage’ Mexico
to assist with the immigration problem (1) his is using a trade weapon on a
nontrade issue. Mexico just finished agreeing
to a revised NAFTA; now the new treaty seemingly means nothing. And if it means nothing for Mexico, how about
the rest of the world? Who is going to
want to reach an agreement with the US, when it can be voided on the whim of
the president and (2) understandably, it makes business executives very cautious
in making expansion plans---which is not good for economic growth prospects.
More.
More.
Trump also added
India the list of countries subject to tariffs.
Which raises the question of why he wants to engage in trade wars on multiple
fronts instead of just focusing on one country at a time. As a note, the example of free trade
illustrated in this article is one in which there are no tariffs in the beginning. The problem with that is that there are Indian
tariffs on US goods. But that was all a
part of this country’s post WWII program of helping war torn/developing countries
improve their economic lot. Now most of
these tariffs are simply subsidies which Trump wants to end. I am OK with that; it just doesn’t make sense
to me to get in the ring with multiple opponents if you want a decent chance to
win.
***overnight,
China makes conciliatory news release.
Finally, the FTC and
DOJ have started investigating Alphabet, Amazon, Facebook and Apple for potential
antitrust actions. I have no idea of their
guilt or innocence. But I do know that these
companies are among US’s crown jewels in the global technology race. A race which I remind you is one main reasons
why the US is duking out with China. I
am mystified.
And
Trump was joined by the House Judiciary Committee.
Bottom
line: the question before us is, does Trump really believe that he can pursue
multiple economically constricting policies simultaneously with electorate
impunity? I feel reasonably sure that if
he continues this behavior, the Mr. Market will join bond, dollar and gold investors
in signaling its concern.
The latest from
Stan Druckenmiller.
Update on valuations.
News on Stocks in Our Portfolios
Revenue of $712.8M (+1.8%
Y/Y) misses by $32.25M.
Revenue of $1B (-2.9% Y/Y) misses by $10M.
Tiffany (NYSE:TIF) declares $0.58/share quarterly dividend, 5.5% increase from
prior dividend of $0.55.
Economics
This Week’s Data
US
April
construction spending was flat versus forecasts of +0.4%
The
May manufacturing PMI was reported at 50.5 versus expectations of 50.6.
The
May ISM manufacturing index came in at 52.1 versus projections of 53.0.
May light vehicle
sales totaled 17.3 million versus estimates of 16.8 million.
International
April
EU unemployment was 7.6% versus consensus of 7.7%
May
EU core inflation was 1.2% versus forecasts of 1.3%
The
May UK construction PMI was 48.6 versus expectations of 50.5.
Other
What
money is versus what we want it to be.
Update
on student debt.
Rand Paul’s new Penny
Budget Bill. Let’s see how far this gets in the DC meat grinder.
Modern Monetary Theory
and the progressive agenda.
What
I am reading today
Seven ways to bear proof
your portfolio.
Hope
for the best, plan for the worst---Jack Reacher
Facts about a Market correction.
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for Survival’s website (http://investingforsurvival.com/home)
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