The Morning Call
8/20/19
The
Market
Technical
The Averages (26135,
2923) had another good day. Volume was down
again; though breadth improved. The Dow ended below its 100 DMA (now
resistance) and above its 200 DMA (now support; voiding Wednesday’s break). The
S&P ended back above its 100 DMA once again. This is the sixth time it has crossed this
level in the last eleven trading days. I
thought this see saw action was over; clearly, I was wrong. So, I am again withholding a
support/resistance call. It finished above
its 200 DMA (now support). Both of the
indices ended above the upper boundaries of their developing very short term downtrends. If they remain there through the close today,
those downtrends will be voided.
The VIX fell another
8 ½ %, but still finished above both MA’s (now support). However, it finished below the lower boundary
of it very short term uptrend; if it remains there through the close today,
that trend will be voided.
The long bond was down
1 ½ %, but remained above both MA’s, in
uptrends across all timeframes. It continues
to be overextended, though it did manage to close one of its gap up opens.
The dollar rose ¼%,
ending in short and long term uptrends and above both MA’s.
Gold declined 1 ¼ %,
but closed 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.
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
are challenging several resistance level.
If successful, that would point to further gains on the upside.
The pin action in the long bond, the
dollar and gold continues to point at the need for a safety trade.
Monday in the
charts.
Fundamental
Headlines
No US data
releases. Overseas, there were two stats:
the July Japanese trade deficit and the July EU CPI were disappointing.
Investor
attention yesterday was focused on:
(1)
weekend
developments [Trump delayed penalties on Huawei, Germany prepared stimulus
measures and China lowered interest rates].
I covered these items in yesterday’s Morning Call,
The
trade war is over; Trump just doesn’t realize it yet.
***overnight,
Markets underwhelmed with Bank of China’s rate reduction.
***overnight, Trump approves F-16 sales
to Taiwan.
(2)
Fed driven headlines this week:
[a] the minutes from the last FOMC meeting will be released on Wednesday,
[b] the Jackson Hole meeting and Powell speech later in the week.
New
Fed ‘buffer tool’ is a joke.
Bottom line: both
the Trump ‘put’ (generating positive economic/trade headlines) and the Fed ‘put’
(promising ever more easy monetary policy) will receive more tests this week. Last week’s lack of follow through to the
Trump announcement to the delay in imposing tariffs is a hint that Trump ‘put’
could be losing its humph. And as you know, I have been suggesting that the recent
pin action in bond, dollar and gold markets are calling the latter into question. Notice I am not making that call (‘hint’, ‘suggesting’). But the risk of those two ‘puts’ losing their
effect is rising; and if it does, the stock market will have a problem.
The latest from
Morgan Stanley.
A transportation
recession has already arrived.
https://www.zerohedge.com/news/2019-08-19/us-transportation-recession-has-already-officially-arrived
News on Stocks in Our Portfolios
Revenue of $7.5B (+1.5%
Y/Y) beats by $100M.
Revenue of $30.84B (+1.2%
Y/Y) misses by $140M.
Economics
This Week’s Data
US
International
June
EU construction output rose 1.0% versus consensus of +1.8%.
July
German PPI was +0.1% versus estimates of 0.0%
August
UK industrial orders index was -13 versus forecasts of -23.
Other
The
probability of recession by August 2020.
Notes
from Cap Kotok.
The
failed promises of the 2017 Tax Cut and Jobs Act.
What
I am reading today
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