The Morning Call
8/23/19
The
Market
Technical
The Averages (26252,
2922) closed mixed yesterday (Dow up, S&P down). Volume was up fractionally; breadth improved. The
Dow ended below its 100 DMA (now resistance) and above its 200 DMA (now support).
The S&P ended above its 100 DMA for a second day. But given its see saw action above and below
this resistance point, I continue to withhold a support/resistance call. It finished above its 200 DMA (now support).
The VIX rose 5 ½ %,
but still finished below its 100 DMA for a second day (now support; if it
remains there through the close today, it will revert to resistance) but above its
200 DMA (now support).
The long bond was
down 5/8 %, but ended above both MA’s and in uptrends across all timeframes. It continues to be overextended but is
working off that condition.
And.
The dollar declined
two cents, closing in short and long term uptrends and above both MA’s. It still has that minor resistance level at its
July 31st high.
Gold was off ¼ %, but finished within very short term and
short term uptrends and above both MA’s.
However, it still has the gap up open from two weeks ago which needs to
be closed. And like TLT, it remains overbought
but becoming less so.
And
Bottom line: long term, the
Averages are in uptrends across all timeframes; so, the assumption is that they
will continue to advance. Short term, they
voided very short term downtrends but are
having problems confirming a move above their 100 DMA. So, they remain in the congestion range dating
back to August 5th.
The mixed pin action of the last couple
of days notwithstanding, the long bond, the dollar and gold continues to point
at the need for a safety trade.
Thursday in the charts.
Fundamental
Headlines
Lots of data released
yesterday. In the US, they were mixed: July
leading economic indicators, the August Kansas City Fed manufacturing index and
weekly jobless claims were better than expected while the August flash
manufacturing, services and composite PMI’s were disappointing.
Adjusting the
recession indicators.
Morgan
Stanley increases the odds of recession.
Overseas,
August EU consumer confidence, the June Japanese All Industry Index and the
August Japanese flash manufacturing PMI were below estimates; however, the August
Japanese flash services and composite, the August EU and German flash
manufacturing, services and composite PMI’s were ahead of forecasts.
The Bundesbank
poured cold water on hopes of German fiscal stimulus.
***overnight,
China announces tariffs on additional US goods.
And threatens US
over currency intervention.
There
were several headlines out of the central banks:
(1)
in CNBC interviews
at the Jackson Hole conference, two regional Fed presidents [Harker, George] delivered hawkish messages on monetary policy.
(2)
on the other hand, the ECB released the minutes from
its last meeting which showed that it is ready to lower rates and ramp up bond
purchases.
Larry Summers says
central bankers are impotent.
Bottom line: the dataflow
has been erratic this week. In the US,
we got upbeat retail numbers on Wednesday, then some really disappointing PMI
stats yesterday---which in combination keeps flashing yellow warning light on.
Overseas, the data
has been poor for the last couple of months; but yesterday, there were solid
PMI numbers from both Japan and Europe. While
the latter could be the first sign that the global economy is recovering, I need
a lot more of the same before I will stop thinking that it will cease being a
drag on our economy.
The central
bankers continue to demonstrate that they are clueless. The ECB is doing what it does best which is
throwing everything including the kitchen sink at a sick European economy that hasn’t
gotten any better in the past and will likely not get any better in the future
whatever it does. On the other hand, it
has been a master at driving interest rates to negative yields which is the
essence of asset mispricing.
The Fed doesn’t
know whether to sh*t or go blind. The constant
uncertainty captured in its narrative and actions reveals either its ineptitude
or its knowledge that QE was a monstrous mistake and that it has no idea how to
get out of its self-inflicted choiceless corner. Its only game now is trying to keep alive the
Fed/Market co-dependency, praying that no one notices the emperor’s new clothes. When, as and if that game ends, equities will
likely return to Fair Value which, according to my Model, is considerably
lower.
News on Stocks in Our Portfolios
Economics
This Week’s Data
US
July
leading economic indicators rose 0.5% versus consensus of 0.2%.
The
August flash manufacturing PMI came in at 49.9 versus estimates of 50.5; the
services PMI was 50.9 versus 52.8; and the composite PMI was 50.9 versus 51.7.
The
August Kansas City Fed manufacturing index came in at -2 versus expectations of
-10.
International
August
EU consumer confidence was -7.1 versus forecasts of -7.0.
July
Japanese CPI was reported at +0.5%, in line.
Other
Lower
mortgage rates are not necessarily a plus for the economy.
Latest
on Brexit.
What
I am reading today
The
illusion of explanatory depth.
Friday
morning humor---if only.
The
last flip of the earth’s magnetic core took 22,000 years.
The savior of China.
The
importance of Hong Kong to mainland China.
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for Survival’s website (http://investingforsurvival.com/home)
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