The Morning Call
6/6/19
The
Market
Technical
The Averages (25539,
2826) had another good day but on even lower volume and only marginally improved
breadth. However, both closed above the
upper boundaries of the very short term downtrends; if they remain there through
the close today, those trends will be voided.
The Dow remained below its 100 DMA (now resistance) but above its 200 DMA
(now resistance); if it remains there through the close next Monday, it will
revert to support. The S&P closed
above its 200 DMA (now support) and above its 100 DMA (now resistance; if it
remains there through the close on Friday, will revert to support). Clearly, the indices are testing multiple
resistance levels. However, until those
challenges are successful, my assumption is still that the direction is lower.
VIX fell 5%, but still finished in a very
short term uptrend and above its 100 DMA (now support). However, it ended below its 200 DMA (now support;
if it remains there through the close on Monday, it will revert to resistance). So, like stocks, it is on the cusp of change.
TLT declined ½ %, but ended above both MA’s (now support) and
in a very short term uptrend. It remains
overbought; so, more downside would not be surprising. However, the retreat so
far has been very muted, given the move in stocks.
The dollar was up 3/8%,
remaining in a short term uptrend and above both moving averages (now support). However, it finished below the lower boundary
of its very short term uptrend, voiding that trend.
GLD rose ¼ %, closing
within a short term uptrend and above both MA’s (now support). However, it still needs to fill one more lower
gap up open.
Bottom line: the
indices are in the process of challenging the downtrend off the May double top,
though volume and breadth have been anemic at best. If they are successful then the question
becomes they will challenge the double top (assuming the validity of the technical
saw that ‘there are no triple tops’, then that challenge should be successful)
or fall short further cementing the likelihood of a double top.
UUP, TLT and GLD
continued to act like safety trades, even though the long bond was down---but
as I said, it was very overbought.
Wednesday in the
charts.
Fundamental
Headlines
Yesterday’s stats
were slightly improved: the May ISM nonmanufacturing index came in better than
anticipated while the May composite and services PMI’s were in line.
Overseas,
they were mixed with Europe showing some improvement and the rest of the world
not so much: the May Japanese services PMI plus the Chinese Caixin composite and
services PMI’s were below estimates; the May EU composite and services PMI’s
were ahead of expectations, April retail sales fell but were in line and April
PPI plunged.
In trade:
Representatives
from Mexico and US met last night to address the tariff/immigration issue. Nothing was resolved but they will meet again
today.
China crack down
on US companies escalates.
China warns US
farmers may lose it as a market permanently.
On the other hand,
it is not like there aren’t other markets.
The Fed released
its latest Beige Book, slightly upgrading the outlook for the economy, saying
that inflation was well under control but that there was a rising concern about
the fallout from our many trade disputes.
While that is somewhat more hawkish than the statements coming out of
Fed officials this week, it was before Trump delivered his Mexican tariff taco. So, I see no reason to doubt that the Fed is
becoming more dovish.
***overnight, the
ECB met and left rates and policy unchanged (dovish).
Bottom line: the
Beige Book was really a nothing burger after Powell’s comments on Tuesday,
leaving a dovish Fed as the dominant factor in setting stock prices---until it
is not.
Trade
is the other factor weighing on the Market though the pin action of the last
two days suggests that it is second fiddle to the Fed.
News on Stocks in Our Portfolios
Revenue of $744M (+1.5%
Y/Y) misses by $18.77M.
Economics
This Week’s Data
US
The
May composite PMI was 50.9, in line; the services PMI was also 50.9, also in
line.
The
May ISM nonmanufacturing index came in at 56.9 versus estimates of 55.5.
Weekly jobless claims
were unchanged versus expectations of a 3,000 decline.
The
April trade deficit was $50.8 billion versus forecasts of $50.7 billion.
Q1
nonfarm productivity grew by 3.4% versus consensus of +3,5%; unit labor costs
fell 1.6% versus projections of -0.8%.
International
May German factory orders were
up 0.3% versus estimates of +0.1%; its construction PMI was 51.4 versus 53.4.
Q1 EU employment advanced
0.3%, in line; GDP growth was 0.4%, also in line.
Other
The
bifurcated economic recovery continues.
Italy
revives talk of parallel currencies.
What
I am reading today
Good ideas can’t be
scheduled.
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