The Morning Call
8/13/19
The
Market
Technical
The Averages (25696,
2882) took another whipping yesterday on still lower volume and weak breadth. The Dow closed below its 100 DMA (now support;
if it remains there through the close on Wednesday, it will revert to resistance);
and the S&P ended back below its 100 DMA (now resistance, voiding last
Thursday move above this boundary), having see sawed above and below this
boundary the last six trading days. Both
indices remained above their 200 DMA’s---which right now is their major support
levels.
The VIX rose 17 ½ %,
finishing above both MA’s (now support) and is building a short term uptrend. That is a bit of negative for stocks.
The long bond soared
2%, remaining above both MA’s and in uptrends across all timeframes. However, it still has last Monday’s gap up
open which needs to be closed.
And from Jeffrey
Snider.
The dollar was off
two cents, ending in short and long term uptrends and above both MA’s. It still has a gap down open which needs to
be filled. It continued to trade in a
ten cent range just below the upper boundary of its former long term trading
range for a sixth day---which has elements
of both good news (it is consolidating in a very tight price range) and bad
news (it can’t get back above former long term trading range boundary).
Gold was up 1%, resuming
a very strong uptrend. It ended within very
short term and short term uptrends and above both MA’s. However, it still has last Friday’s gap up
open which needs to be closed.
Bottom line: long term, the
Averages are in uptrends across all timeframes; so, the assumption is that they
will continue to advance. However, they are
in the process of again challenging their 100 DMA’s. If successful, it would
suggest that the recent rally was just the necessary consolidation to close
those gap downs, opening the way for another leg down in the indices. That notion is reinforced by the pin action in
the long bond, the dollar and gold which are all pointing at the need for a
safety trade. But remember the lower boundary of their short term uptrends are
much lower. So, the indices could
experience a big correction and still not break their upward momentum.
Monday in the
charts.
https://www.zerohedge.com/news/2019-08-12/stocks-slammed-traders-seek-safe-havens-geopolitical-chaos
Fundamental
Headlines
One stat released
yesterday: the July budget deficit was $120 billion; while in line, that is a
monster number and is not a plus for the economy (i.e. the federal government
usurping capital from the businesses and consumers).
Overseas, June
Chinese vehicle sales declined but less than anticipated; and July loan growth
was below expectations.
Other headlines
were more political in nature---more turmoil in Hong Kong and an election
surprise in Argentina that tanked its currency.
I noted in last weekend’s Closing Bell, that the number of trouble spots
around the world was growing, many of which could adversely impact an already stumbling
global economy. Add Argentina to the
list.
Bottom line: while
the US/China trade dispute and an uncertain Fed monetary policy have dominated investor
concerns of late, yesterday’s report on the July US budget deficit reminds us
that an extraordinarily irresponsible fiscal policy is another major problem
that will adversely impact the US economy and the Markets. The government simply cannot keep sponging up
a major portion of investable US capital without a negative effect on economic growth---remember
the Reinhart/Rogoff study that demonstrated that a debt/GDP ratio over 90%
inhibits growth (now at 106% in US).
This is especially relevant when the government should be running a surplus
or, at least, not growing its debt. This is not a plus for corporate earnings growth
and, hence, Market valuation.
Inflation showing
up in all the wrong places.
https://www.zerohedge.com/news/2019-08-12/inflation-showing-worst-place-possible-consumers-walmart-0
Is China a
currency manipulator?
Debt-end (must
read):
Foreign stock markets
are starting to look more attractive.
News on Stocks in Our Portfolios
Economics
This Week’s Data
US
The
July budget deficit equaled $120 billion, in line.
July
CPI was +0.3%, in line; core CPI was +0.3% versus +0.2%.
Month
to date retail chain store sales were slower than in the prior week.
International
July
Japanese PPI was 0.0% versus expectations of +0.1%; July machine tool orders
fell 33% versus -32%.
July
German CPI was 0.5%, in line; PPI was -0.3% versus +0.2%.
May
UK jobs grew by 115,000 versus estimates of 65,000; Q2 productivity fell 0.2%,
in line.
August
EU economic sentiment came in at -43.6 versus consensus of -21.7.
Other
July
LA port traffic down YoY.
July
rail carloads down YoY.
The
invention of money.
What
happens as societies become richer.
An
updated look at Brexit.
What
I am reading today
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