The Morning Call
5/22/20
The
Market
Technical
The Averages (24474, 2948) continue to struggle to make
upward progress, closing lower on the day and leaving the Market in a somewhat confused
technical state: (1) neither closed Monday’s huge gap up opens, (2) both finished
above the top end of the 4/17-4/21 trading range, (3) the Dow is still building
a double top formation, (4) the S&P remained within its very short term
uptrend; the Dow did not and (5) the S&P bounced down off its 100 DMA.
My assumption
continues to be that equity prices’ bias is to the upside but that effort will
be labored. The resistance presented by both
indices 100 and 200 DMA, the magnetic pull of those gap up opens and the pin
action in the VIX, supports that notion.
For the optimists.
https://nymag.com/intelligencer/2020/05/why-is-the-stock-market-rising-if-the-economy-is-so-bad.html
TLT and UUP were
up, GLD down. But all their charts
remain strong, reflecting risk aversion among their investors.
Thursday in the charts.
Fundamental
Headlines
The
economy
The US numbers
were again weighted to the ‘less bad’ than had been expected scenario. April existing home sales, the April leading
economic indicators, the May flash manufacturing, services and composite PMI’s
fit that pattern. On the other hand, weekly
jobless claims and the May Philadelphia Fed manufacturing index were disappointing.
Overseas, the
pattern was similar. May EU flash
consumer confidence as well as the May Japanese, German, EU and UK flash
manufacturing, services and composite PMI’s were better than anticipated. The only disheartening stat was the April Japanese
trade balance which was much more negative than forecast.
The
coronavirus
***overnight
update.
How Florida has
succeeded.
Another dump on
Sweden. The problem with this analysis
is that is just looks at deaths from the coronavirus. Nothing about the economic havoc wreaked on
the average citizen nor the deaths that occurred because a test, treatment, etc.
wasn’t done.
A wave of small business
closures is on the way.
Part 2.
The
Fed
Did the Fed
overreact?
And is it still
doing so?
https://www.zerohedge.com/markets/feeding-fednzy-powell-announce-25-billion-bond-etf-purchases-today
Fed balance sheet
hits $7 trillion.
China
***overnight,
China cracks down on Hong Kong and abandons growth targets.
Hong Kong again
sticking its finger the Beijing’s eye.; Beijing’s response.
The senate’s
response to Beijing’s response.
US just made a new
sale of military hardware to Taiwan---which will clearly piss of the Chinese.
Bottom line: as
encouraging as the trend of ‘less bad’ economic data is, I still believe that
the economy faces some major headwinds (the magnitude and extent of an economic
recovery, the drag that the wildly expansive fiscal policy will exert on capital
investment and consumption, the righting of the mispricing and misallocation of
assets; plus the potential negative fallout from a US/China standoff) that
render current equity valuations excessive.
News on Stocks in Our Portfolios
Economics
This Week’s Data
US
April
existing home sales declined 17.8% versus estimates of -18.9%.
The
April leading economic indicators fell 4.4% versus forecasts of -5.5%.
The
May flash manufacturing PMI came in at 39.8 versus expectations of 38.0;
the services PMI was 36.9 versus
30.0; the composite PMI was 36.4 versus 32.5.
International
April
Japanese CPI was -0.2% versus consensus of -0.5%; ex food and energy, it was
+0.2% versus +0.4%.
April
UK retail sales fell 18.1% versus projection of -16.0%; ex fuel, they declined
18.2% versus -15.0%.
Other
Hotel
occupancy rates declined 54% YoY.
Loan
defaults hit six year high.
Oil
down after Chinese abandon growth targets,
What
I am reading today
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