The Morning Call
6/12/19
The
Market
Technical
The Averages (26048,
2885) retreated yesterday, but only slightly.
Volume was up a tad but still quite low and breadth deteriorated. Both ended above their 100 and 200 DMA’s (now
support). But that minor resistance level
held again.
VIX was up fractionally, leaving it in a very
short term uptrend, above its 100 DMA (now support) but below its 200 DMA (now
resistance). I continue to believe that this pin action suggests way too much
complacency.
TLT advanced slightly,
finishing above both MA’s (now support) and in a very short term uptrend.
The dollar
declined one cent, but remained in a short term uptrend and above both
moving averages (now support).
GLD fell 1/8 %, but
closed 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: having
successfully challenged multiple resistance levels, it seems likely to me that
the indices will sustain their upward momentum.
Supporting that notion is the fact that that while that minor resistance
level halted a powerful advance, the retreat off of that level so far has been negligible. Not so positive is the low volume, relatively
weak breadth and a VIX that is signalling extreme complacency.
Yesterday’s pin action in the bond, dollar and gold
markets was of no informatinal value.
Tuesday in the charts.
Fundamental
Headlines
Yesterday’s stats
were mixed; month to date retail chain store sales were disappointing, May
PPI was in line and the May small business optimism index came in better than
anticipated.
Overseas,
the numbers were pretty bleak. April UK
trade deficit was lower than expected but GDP, construction orders, manufacturing
production and industrial production were below estimates while unemployment
was 3.8%, in line.
May
Japanese machine tool orders plunged.
Latest nowcasts.
China trade
remains the macro issue at center stage.
Yesterday was filled with a constant back and forth on who is going to
what to whom.
And.
And.
Apple prepared to build iPhones
outside of China.
https://www.zerohedge.com/news/2019-06-11/apples-prepared-manufacture-us-bound-iphones-outside-china
Nintendo moving switch production
out of China.
The damage to
world trade may already have been done.
And if that isn’t enough,
African swine flu devastating the Chinese pork industry.
Bottom line:
the concerns about immigration/trade problem with Mexico appears behind
us (though I remain unconvinced that settling it has done anything to improve
our own economic outlook over the short/intermediate term) and the Market is
all in on multiple Fed rate cuts (the FOMC meets next week). On the other hand, the economy is not
improving either here or abroad.
So,
what is going to improve the economy/corporate profits enough to move
valuations higher? The only thing that I
see is a China trade deal. My assumption
is that it will not likely occur until at least after the 2020 elections; and
then who knows what a deal will look like.
That is, unless Trump folds---which is bad news. So, the technical aside, it seems to me to be
a time of caution and taking profits when given the opportunity.
News on Stocks in Our Portfolios
Economics
This Week’s Data
US
Weekly
mortgage applications rose 26.8% while purchase applications were up 10.0%.
(who said low interest rates don’t stimulate housing?)
May CPI was up 0.1%, in
line; core CPI was +0.1% versus +0.2%.
International
May
Japanese PPI was -0.1% versus estimates of 0%.
May
Chinese CPI was flat, in line; PPI was up 0.6%, also in line; loan growth rose 13.4% versus 13.5%.
Other
Currency
devaluation is not good for the economy.
Forget
employment rates, pay attention to the participation rate.
EU suddenly discovers that it can
solve the Irish border (trade) problem with technology. Odds of Brexit rise.
What
I am reading today
How safe is sunscreen?
Count your blessings even when they
come well disguised.
Watching paint dry.
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