An Analysis of Daily Events that Impact Your Money
Wednesday, May 20, 2020
The Morning Call---Labored progress
The Morning Call
The Averages (24206, 2922) gave back part of Monday’s gains,
finishing in a somewhat confused technical state: (1) neither closed Monday’s
huge gap up opens, (2) the Dow created a double top; the S&P a triple top,
(3) the Dow traded back into its 4/17-4/21 trading range; the S&P remained
above it, (4) the S&P remained within its very short term uptrend; the Dow
My assumption continues
to be that equity prices’ bias is to the upside but that effort will be labored. The lack of follow through to Monday’s Titan
III shot, the magnetic pull of those gap up opens and the pin action in the VIX,
supports that notion.
the other hand, overseas, the data was weighed to the positive. March UK
unemployment, March EU construction output and May EU and German economic
sentiment were above forecasts while March Japanese industrial production was in
line and March UK average earnings were below estimates.
Bottom line: the economy is
almost surely improving as the country emerges from lockdown. That is clearly a positive for stocks. However, we have no idea how quickly economic
conditions will recover and to what extent.
Valuation Model indicates that even if the economy regains 2019 level of
activity by late 2020, most stocks are overvalued. There are a select group of stocks that are
close to their Buy Value Range but lower prices are needed to get them into