The Morning Call
6/13/19
The
Market
Technical
The Averages
(26004, 2879) retreated yesterday, but again only slightly. Volume was down noticeably while breadth
stabilized. Both ended above their 100
and 200 DMA’s (now support). But that
minor resistance level held again.
VIX was down ½%---another confusing
performance (it is usually up on a down day).
It ended above its 100 DMA (now support), below its 200 DMA (now resistance)
and below the lower boundary of its very short term uptrend (if it remains
there through the close today, the trend will be voided). However, the close below that boundary was
more a function of the steep incline of the trend line than of the small price decline.
TLT advanced
slightly, finishing above both MA’s (now support) and in a very short term
uptrend.
The bond market
may be wrong about future Fed decisions, but is it wrong about the
economy? In short, since the Fed is
usually wrong (and it has been so twice in the last six months), why should
bond investors bet on the Fed? Their bet
is on the economy.
The dollar was up
¼ %, remaining in a short term uptrend and above both moving averages (now support).
GLD rose ½ %, closing
within 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
lack of any meaningful sell off in the indices after unsuccessfully challenging
a minor resistance level if more suggestive of a consolidation effort than a
turn in investor sentiment. As long as
this kind of pin action continues, my assumption remains that upward momentum
has not been broken and a move higher is likely.
However, I repeat the caveat that low volume,
relatively weak breadth and a VIX that is signalling extreme complacency are
reasons to doubt that scenario. In
addition, the pin action in the bond, dollar and gold markets again pointed at
their function as a safety trade.
Wednesday in the
charts.
Fundamental
Headlines
Yesterday’s
stats were mixed: weekly mortgage and purchase applications soared, May CPI was
in line while core CPI was less than consensus and the May budget deficit
stands as testament to irresponsible fiscal policy.
Overseas, May
Japanese PPI was below estimates while May Chinese CPI and PPI were in line but
loan growth slowed.
***overnight,
two tankers hit by torpedoes near Straits of Hormuz.
It
was another relatively slow news day.
The China trade remained at center stage to the extent that there was
any theme.
More harsh
language from China.
The value of
US/China trade continues to shrink.
The World Trade
Organization weights in on the economic impact of the US/China trade dispute.
Political fallout
from slowing exports.
Bottom line: in
the absence of any surprise headlines, investors seem to be waiting for next
week’s events---FOMC meeting (rate cut or no rate cut) and the G20 meeting (at
which it is hoped that Trump and Xi will meet).
The technicals appear to confirm this.
In
the meantime, the US and global economies continue to struggle to grow with no
sign of any improvement. That doesn’t
augur well for profit growth. Neither
does a monstrous and growing federal deficit/debt which usurps funds for
potential investment uses. Yes, there
may be a US/China trade deal; but I doubt one anytime soon.
That
leaves the Fed ‘put’ to drive the Market (realizing that based on history it
will do little for the economy) which is already richly valued. For me, that means caution, taking profits when
given the opportunity and keeping alert for values in Market sectors that have
been trashed.
News on Stocks in Our Portfolios
Economics
This Week’s Data
US
The
May budget deficit was $208.0 billion versus estimates of $185.5 billion.
Weekly jobless claims
fell 1,000 versus consensus of down 7,000.
May
import prices were off 0.3% versus projections of -0.2%; export prices were
down 0.2% versus -0.1%.
International
Other
Manufacturing
peak?
Brexit
turmoil continues.
Latest
on Italy’s fiscal battle with the EU.
What
I am reading today
Thursday
morning humor: maybe we should stop worrying about the world ending in twelve
years and follow Russia’s lead.
Being wrong even when you
are right.
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