The Morning Call
7/16/19
I am leaving town on family business. I am not sure when I will return.
The
Market
Technical
The Averages (27359,
3014) rose modestly yesterday. Both are above their MA’s and in uptrends across
all time frames. Still volume was down,
remaining anemic; breadth was again mixed.
In addition, the recent gap up opens still need to be closed. My assumption is that they will challenge the
upper boundary of their long term uptrends (29947, 3191), though the aforementioned
conditions remain a potential early warning of a reversal.
The VIX was up 2
3/8 %, despite it being a price up day. That
said, it finished below both MA’s and in a very short term downtrend. So, impetus is lower. Nonetheless, it is close to its historic lows---which
should provide pretty stiff resistance.
The long bond advanced
another ½ %, holding above an obvious minor support level. Given its big runup since late May, the consolidation
so far has been well within the bounds of ‘normal’. Nonetheless, it is above both MA’s, in a very
short term uptrend and has a gap down open which needs to be filled. The big question remains how TLT will act
longer term in response to the Powell’s recent surprisingly dovish tilt---so
far, it is not buying the improving economy/higher inflation/rising long bond
scenario.
And.
The dollar rose
1/8%, ending above both MA’s and in a short term uptrend---not what I would
expect with Trump crying for a lower dollar and the Fed seemingly accommodating
him with a more aggressive expansion of monetary policy.
GLD was unchanged,
leaving it above both MA’s and in a short term uptrend. However, it finished below the lower boundary
of its very short term uptrend by virtue of the boundary’s steep rate of ascent
and GLD’s flat performance. Still, it
has made one gap up and one gap down opens and those need to be dealt
with.
Bottom line:
despite being overbought (and getting more so) on weak volume, deterorating
breadth indicators and the need to fill the recent gap up opens, my assumption
remains that the Averages are on their way to challenging the upper boundaries
of their long term uptrends.
The other indicators appear to have shaken off the
initial shock of the Fed’s push to QEIV and seem to be returning to the
econoimc slowdown/safety trade investor mindset. However, I would like to see another week of
trading before drawing any conclusion about whether the Fed’s action has
altered their investors’ outlook.
Monday in the charts.
Fundamental
Headlines
Only one stat
reported yesterday: the July NY Fed manufacturing index was stronger than
anticipated. Overseas, there was a host
of datapoints out of China most of it good: YoY Chinese GDP was in line;
industrial production, retail sales and fixed asset investment were better than
expected.
Few
other headlines, though there were a number of articles addressing Market
valuations:
How overvalued is
the market?
Investors all in
on stocks.
The post
retirement society.
The latest from
Jim Rogers.
Bottom line: we
are moving into earnings season with expectations somewhat cautious. But as overbought as this Market is, it has
been resistant to any kind of decline however the fundamentals are unfolding. My thesis is that this is explained by the
Fed/Market codependency which is likely to continue until investors come to
realize that higher prices don’t mean a higher discounted value of future cash
flows.
News on Stocks in Our Portfolios
Johnson & Johnson (NYSE:JNJ): Q2 Non-GAAP EPS of
$2.58 beats by $0.14; GAAP EPS of $2.08 beats
by $0.04.
Revenue of $20.56B (-1.3%
Y/Y) beats by $170M.
Economics
This Week’s Data
US
June
retail sales soared +0.4% versus expectations of +0.1%; ex autos, they were up
0.4% versus +0.1%.
June
import prices fell 0.9% versus estimates
of -0.7%; export prices were -0.7% versus -0.2%.
International
May
UK unemployment was 3.8%, in line.
The
May EU trade surplus was E23 billion versus forecasts of E16.3 billion; July economic sentiment was
-20.3 versus -20.9.
July German economic
sentiment was -24.5 versus projections of -22.3.
Other
The growth of
the spending class ends in 2020.
Global
debt hits $246 trillion.
What
I am reading today
How to have a good
flight.
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