Wednesday, May 27, 2020

The Morning Call---Money's for nothing and the chicks are free

The Morning Call


The Market

The Averages  (24995, 2991) exploded at the open but experienced a bit of heartburn near the close.  Still, they closed with a major gain.  This strong performance went a ways in correcting the Market’s confused technical state.  The Dow voided its developing double top formation and reset its very short term trend to up, joining the S&P.  The S&P pushed above its 100 DMA (now resistance; if it remains there through the close on Thursday, it will revert to support) and its 200 DMA but failed to hold above that level.  Nevertheless, those huge 5/18 gap opens remain unfilled and they 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 but that effort will be labored.  The resistance presented by both indices’ 100 and 200 DMA’s, the magnetic pull of the 5/18 gap up opens and the pin action in the VIX (which continues to be unable to push below its 5/13 low) support that notion.

TLT, GLD and UUP were down---not surprising on a big risk off day.  However, their charts remain strong, suggesting that their investors remain risk averse.

            Tuesday in the charts.



Yesterday’s economic stats were weighed to the plus side.  The March Case Shiller home price index, April new home sales, the May Dallas Fed manufacturing index were better than anticipated while May consumer confidence and the April Chicago Fed national activity index were below expectations.

            Overseas, the numbers were even more upbeat. The March Japanese leading economic indicators, its March All Industry index and June German consumer confidence were above forecast and final Q1 German GDP was in line.
            The coronavirus

            ***overnight update.

            More coronavirus data.

            The leak from the Wuhan lab.

            We should have never closed.
European Commission proposes E750 billion recovery fund.

            The Fed

            Clueless wizards.

            Bottom line: what do you say about a Market that is unfazed by unknowns that include the magnitude and extent of an economic recovery, scale of changes that will almost surely occur in American’s social and spending patterns and heightening tensions with China?  You say that as long as investors are unconcerned about valuations, as long as ‘money’s for nothing’, stock prices’ bias will be up.  I cannot buy a stock whose valuation is almost solely determined by monetary policy.

            The latest from John Mauldin.

    News on Stocks in Our Portfolios

   This Week’s Data


            Weekly mortgage applications rose 2.7% while purchase applications were up 8.6%.

Month to date retail chain store sales fell less than in the prior week.

            The March Case Shiller home price index was up 1.1% versus expectations of +0.2%

                April new home sales were up 0.6% versus estimates of down 21.9%.

            May consumer confidence came in at 86.6 versus forecasts of 87.5.

            The May Dallas Fed manufacturing index was -49.2 versus consensus of -57.0.


            April Chinese YoY industrial profits fell 27.4% versus estimates of -28.0%


How US consumers are spending during coronavirus lockdown.

What I am reading today

            Astronomers discover cosmic ‘ring of fire’

            Chinese troops reportedly have ‘invaded’ Indian territory.

            Four financial milestones to reach before retirement.

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