The Morning Call
6/26/19
The
Market
Technical
The Averages
(26548, 2917) sold off yesterday, not surprising given their overbought
condition. There are two technical
factors at work. (1) both indices traded back below the former upper boundary
of their short term trading range one day after resetting to an uptrend. Normally, when this kind of immediate
reversal takes place, I put the
directional call on hold, (2) however, as I have noted before, they
remain above those gap up opens made last Tuesday which need to be filled.
So, the Averages
are in sort of a technical no man’s land.
On the one hand, they are overbought and need to fill the lower gap up
opens; so, a selloff is not surprising.
The problem is that it occurred at a crucial resistance level, which it
overcame for a single trading session, then fell back; raising the possibility
of a triple top. Plus, volume remains
abysmal. For the moment, I am sticking
with my ‘no triple top’ call and assume that the current retreat will be
shallow and that momentum remains to the upside.
VIX was up 6 3/8 %. It ended above its 100 DMA but is still in a
very short term downtrend. Intraday, it
touched the upper boundary of its very short term downtrend and backed off
slightly.
TLT rose 3/8 %,
closing above both MA’s (now support), in a very short term uptrend and is
again nearing (31 cents below) its twenty year high.
The dollar advanced
¼ % on monster volume; but remained below its 100 DMA for a third day,
reverting to resistance. However, it
ended in a short term uptrend, above its 200 DMA (now support) and still needs
to close Thursday’s gap down open.
GLD was up another
1/8 %, again on huge volume, finishing in a short term uptrend, above both MA’s
(now support) and above the upper boundary of its intermediate term trading
range for a second day. If it remains
there through the close on Thursday, it will reset to an uptrend. However, there is a major gap up open lower
down---which needs to be filled.
Plus.
Bottom line: after
falling back below the upper boundaries of their short term trading range after
resetting on Monday, I am putting the resetting to uptrends on hold. I continue to believe that momentum remains
to the upside; though clearly, that call is less certain now.
It is remains disconcerting that volume is low (versus
high volume in bonds, the dollar and gold which are pointing to recession/or
the need for a safety trade), breadth is weakening, other indices failed to confirm Monday’s
breakout of the Dow/S&P and the VIX
has been acting unconventionally for the last couple of weeks.
Tuesday in the
charts.
Fundamental
Headlines
Yesterday’s
economic releases made for pretty bleak reading: the April Case Shiller
home price index, May new home sales, June consumer confidence , the June
Richmond Fed manufacturing index and month to date retail chain store sales
were all disappointing. Nothing
overseas.
This is an upbeat
assessment of the economy. However, the
author, like so many others, thinks that Market is discounting a Fed rate cut
when it is discounting further weakening in the economy.
Sticking with the
optimistic theme, this from my favorite optimist. But note that most of his stats are favorable
because interest rates are low and stock prices high.
Interest rates don’t need
to rise much to cause a recession.
There
were headlines on:
(1)
the Fed: in speeches, Bullard and Powell sounded
more hawkish---not something that makes Mr. Market happy.
(2)
the US/Chinese trade talks. Administration officials said that Trump and
Xi will talk at G20, but there will likely be no deal.
Pain from Trump tariffs reshaping global
trade.
***overnight, Mnuchin said
US/China deal was 90% done.
We already heard that but Markets got jiggy.
Bottom
line: the economic data is not
improving. The question is will it show
up in second quarter earnings---which are about to begin being reported.
We will know more about the
US/Chinese trade dispute by this coming weekend; though yesterday’s and today’s
comments out of the White House paint a very murky picture. As you know, I see no incentive for the
Chinese to comply with US demands for reforms in their industrial/IP theft
policies until the pain is excruciating and maybe not even then---which means
in the short term, Trump either folds or there is no deal.
Of course, the stock market/Fed
co-dependency is the major factor in equity prices. Yesterday’s response to the hawkish comments
from the Fed as well as the market advance since early June in the face of
lousy economic, trade and Middle East headlines is a testament to that. Until that paradigm changes, the trend in
stock prices will likely remain to the upside.
They never learn---Merrill Lynch caught
manipulating precious metals market.
Subscriber Alert
As I reported
yesterday, AbbVie (ABBV) is buying Allergan.
ABBV stock sold off on the news---some of the selling pressure is coming
from the risk arbitrageurs (sell short AbbVie, go long Allergan), some because
investors think that ABBV is paying too much for Allergan. However, the transaction will be accreditive
and the company will continue to pay its current dividend (currently yielding
6.5%) The stock is now in its Buy Value
Range. The Dividend Growth Portfolio
already owns a full position. I am
adding it to the High Yield Buy List and buying a full position.
News
on Stocks in Our Portfolios
General Mills (NYSE:GIS):
Q4 Non-GAAP EPS of $0.83 beats by $0.07; GAAP EPS of $0.94 beats
by $0.19.
Revenue of $4.16B (+6.9%
Y/Y) misses by $80M.
Economics
This Week’s Data
US
The
April Case Shiller home price index rose 0.8% versus projections of +0.6%.
May
new home sales fell 7.8% versus expectations of +1.9.
The May trade deficit was
$74.5 billion versus consensus of $71.0 billion.
May
durable goods orders fell 1.3% versus an anticipated decline of 0.1%; ex
transportation they were up 0.3% versus +0.1%.
May
wholesale inventories advance 0.4% versus projections of +0.6%; however, sales were
weak.
June
consumer confidence came in at 121.5 versus estimates of 131.1.
The
June Richmond Fed manufacturing index was 3 versus forecasts of 7.
Month
to date retail chain store sales declined at a faster rate than the previous
week.
Weekly
mortgage applications were up 1.3% but purchase applications fell 0.9%.
International
June
German consumer confidence was reported at 9.8 versus expectations of 10.0.
Other
More
financial market liquidity problems.
What
I am reading today
How
a janitor at Frito Lay invented the flaming hot Cheeto
Bernie
Sanders student debt forgiveness idea is a bailout for the rich.
More:
George Orwell and the Left.
Which bag is better for the environment?
A great argument for a sell discipline.
Bitcoin continues to soar.
Visit Investing
for Survival’s website (http://investingforsurvival.com/home)
to learn more about our Investment Strategy, Prices Disciplines and Subscriber
Service.
No comments:
Post a Comment