The Morning Call
5/29/20
The
Market
Technical
The Averages (25400, 3029) started the day on their front
foot but faded near the close. However, (1)
both of the indices remain in very short term uptrends, (2) the Dow finished
above its 100 DMA for a second day [now resistance, if it remains there through
the close today, it will revert to support] and (3) the S&P ended above its
100 DMA for a third day, reverting to support and its 200 DMA for a second day [now
resistance; if it remains there through the close Monday, it will revert to
support] The one negative is those huge
5/18 gap opens that remain unfilled and will continue to act as a magnet that
needs to be closed.
My assumption
continues to be that equity prices’ bias is to the upside, as they are overcome
two restraining factors---the resistance presented by both indices’ 100 and 200
DMA’s and the pin action in the VIX.
GLD was up, but
(1) TLT was down, ending right on the upper boundary of its intermediate term
uptrend and (2) UUP was down big on volume, finishing below its 100 DMA [now
support; if it remains there through the close next Monday, it will revert to
resistance] and its 200 DMA [now support; if it remains there through the close
next Tuesday, it will revert to resistance].
Clearly, challenges are starting
to occur in these indicators which if successful would confirm the risk on pin
action in stocks.
Thursday in the
charts.
Fundamental
Headlines
The
economy
Yesterday’s
datapoints were slightly weighed to the negative. April durable goods orders and the May Kansas
City Fed manufacturing index were better than anticipated while weekly jobless
claims, April pending home sales and the second estimate of Q1 GDP growth were disappointing
Overseas,
May EU business and consumer confidence came in above estimates while economic,
industrial and services sentiment were below.
May German inflation was in line.
The
coronavirus
***overnight
update.
Will politicians
admit their mistake?
The
Fed
Cue the recovery.
China
Trump says that he
will hold a news conference on China today.
US/China feuded
spells trouble for the US economy and stock market.
US/China warships
face off in South China Sea.
China/India border
tensions escalate.
Bottom line: as you can tell by the above headlines, the growing
strains in the US/China relationship dominated investor attention
yesterday. As you know, I believe that a
breakdown in trade (or worse) is a major risk to any improvement in US economic
growth. That could potentially translate
into Market risk; though with all the liquidity being pumped into the financial
market, I have doubts.
News on Stocks in Our Portfolios
Economics
This Week’s Data
US
April
pending home sales declined 21.5% versus forecasts of -15.0%
April personal income
rose 10.5% (think transfer payments( versus estimates of -6.5%; personal
spending fell 13.6% versus -12.6%; the trade balance was -$69.7 billion versus
-$61.2 billion; wholesale inventories were up 0.1% versus -1.4%; the PCE price
index was -0.5% versus -0.7%; core PCE price indicator was -0.4% versus -0.3%.
The
May Kansas City Fed manufacturing index was reported at -25 versus consensus of
-46.0.
International
April Japanese
unemployment was 2.6% versus expectations of 2.7%; retail sales were -9.6%
versus -8.2%; industrial production was -9.1% versus -5.1%; YoY housing
starts were down 12.9% versus -12.1%;
YoY construction orders were -14.2% versus -16.3%; May consumer confidence was
24.0 versus 25.1.
April German retail
sales were 5.3% versus projections of -12.0%.
May EU CPI was
-0.1% versus forecasts of 0.0%.
Other
Should
we fear post pandemic inflation?
It
matters how the money is spent.
The
distribution of April economic growth.
What
I am reading today
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