The Morning Call
8/9/19
The
Market
Technical
The Averages (26378,
2938) followed through Wednesday’s big intraday rebound with a very strong
performance, closing last Monday’s gap down opens. However, volume was down again and while breadth
improved, money flow remained negative. The
Dow closed above its 100 DMA (now support) and the S&P ended above its 100 DMA
one day after reverting to resistance. I
am going to hold that call in abeyance pending more follow through. Both
indices remained above their 200 DMA’s.
And with more detail.
The VIX was down
another 13 ¼ %, but still finished above both MA’s (now support). That is a bit of negative for stocks.
The long bond advanced
¼%, remaining above both MA’s and in uptrends across all timeframes. However, it experienced a gap up open on
Monday which needs to be closed.
The dollar was up
slightly on huge volume, ending in short and long term uptrends and above both
MA’s. It still has a gap down open which
needs to be filled. However, it did
close below the upper boundary of its former long term trading range for a fourth
day---which is a bit worrisome as it raises the odds that Friday’s breakout
could prove false. Follow through.
Gold jumped another
½ %, ending 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: the Averages are in
uptrends across all timeframes, closing Monday’s gap down opens. Now, the question is, can the rally continue
or are stocks now free to resume a downtrend.
I await the answer. The major argument against any kind of rally is that
the long bond, the dollar and gold are all pointing at the need for a safety
trade.
Thursday in the
charts.
Fundamental
Yesterday’s data
releases were mixed: weekly jobless claims fell more than expected while
August wholesale inventories were below estimates and sales were even worse.
Overseas, one
number: the July China trade balance came ahead of forecast.
Headlines
There were few
notable headlines. So, I will continue the
focus on central bank monetary policy.
The Fed and demand
versus supply ‘shocks’.
The Fed is the
problem.
Bottom line: the
concern over a worsening of the trade war seems to be subsiding, though my thesis
remains that the Chinese will do nothing concrete before November 2020 and may
be not even then. I think the Chinese signaled fairly clearly on
Monday that if Trump imposes those additional tariffs on September 1st,
they will devalue the yuan. So, the
level of economic pain is on Trump’s shoulders.
Of course, there
is always to Fed to bail out the Market (forget about the economy; these guys
have done nothing but damage since QEI).
I noted yesterday that the investors may be starting to question their faith
in the central banks/the Fed ability to influence their economies. The risk is increasing that investors’
glorified perception of the Fed is becoming more tenuous.
The math of
devaluation.
Here is an article
by an opponent of Trump’s China strategy.
News on Stocks in Our Portfolios
C.H. Robinson
Worldwide (NASDAQ:CHRW)
declares $0.50/share quarterly dividend, in line with previous.
United
Parcel Service (NYSE:UPS) declares $0.96/share quarterly dividend, in line with
previous.
Nike
(NYSE:NKE) declares $0.22/share quarterly dividend, in line with
previous.
Economics
This Week’s Data
US
August
wholesale inventories were flat versus estimates of +0.2%; and worse, sales
fell 0.3%.
July PPI was up 0.2%, in
line; core PPI fell 0.1% versus +0.2%.
International
July
Chinese CPI was up 0.4% versus expectations of up 0.2%; PPI was -0.3% versus
-0.1%.
The June German trade balance was
+E18.1 billion versus estimate of E18.6 billion.
Q2
UK GDP was -0.2% versus consensus of 0.0%; construction output was -0.2% versus
+0.2%; industrial output was -0.1% versus -0.2% manufacturing output was -0.2%
versus -0.1%; business investment was -0.5% versus -0.3%; Q2 GDP was -0.2%
versus unchanged.
Other
What
I am reading today
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