Friday, June 14, 2019

The Morning Call---War in the Middle East. Buy, buy, buy


The Morning Call

6/14/19

The Market
         
    Technical

The Averages (26106, 2891) bounced yesterday, with the DJIA ending above the minor resistance level and the S&P right on it.  Volume was down even more while breadth improved.  Both ended above their 100 and 200 DMA’s (now support). 

 VIX was down another ½%.  It finished above its 100 DMA (now support), below its 200 DMA (now resistance) and below the lower boundary of its very short term uptrend for a second day, voiding that trend.   However, as I noted yesterday, 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 3/8%, finishing above both MA’s (now support) and in a very short term uptrend. 

            US Treasury downgrades its outlook for inflation.

The dollar was up two cents, remaining in a short term uptrend and above both moving  averages (now support).

GLD rose 5/8%, 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:  yesterday’s pin action lends credence to the notion that the indices have been digesting their strong June advance rather than being really stymied by a minor resistance level.  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. 

            Thursday in the charts.

    Fundamental

       Headlines

            Yesterday’s numbers were disappointing: weekly jobless claims fell less than anticipated while May import and export prices declined more than expected.  Nothing from overseas.

New survey shows 69% of US CFO’s expect a recession by the end of 2020.

            The lead headline of the day was the attacks on tankers near the Straits of Hormuz.  I leave the analysis of implications of this incident to the foreign policy experts, except to state the obvious---armed conflict and/or the severe curtailment of oil supplies would likely be a negative for the global economy and corporate earnings (except, of course, for the energy complex).

            Latest on the attacks on tankers in the Gulf of Oman.

            Bottom line: war in the Middle East.  Buy, buy, buy.  As long as the Fed has the Market’s back, it will remain the key factor in equity pricing.  Forget that Averages are a short hair away from their all-time highs and valuations are rich.  For me, that means caution, taking profits when given the opportunity and keeping alert for values in Market sectors that have been trashed.
      
            Projected quarterly dividends through Q2 2020.

    News on Stocks in Our Portfolios
 
           

Economics

   This Week’s Data

      US

            May retail sales grew 0.5% versus estimates of +0.6%; ex autos, they were +0.5% versus +0.3%.

     International

May Chinese YoY industrial output was up 5.0% versus expectations of up 5.4%; fixed asset investment was up 5.6% versus 6.1%; retail sales were +8.6% versus +8.1%.

April Japanese industrial production increased 0.6%, in line.

    Other

           
            Trade worries are hurting economic optimism.

What I am reading today

            Who should consider a reverse mortgage and who shouldn’t.
                           
            The math on social security isn’t getting any better.

            More art than science.
            https://theirrelevantinvestor.com/2019/06/12/more-art-than-science/           

            Overcoming frustration.

            What we believe and what is.

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