The Morning Call
5/21/20
The
Market
Technical
The Averages (24575, 2971) reversed direction again,
closing higher on the day. But that didn’t
cure the Market’s 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 S&P broke above its double top [negating a potential
triple top] while the Dow is still in a double top formation, (4) the S&P
remained within its very short term uptrend; the Dow did not and (5) the
S&P ended right on its 100 DMA [now resistance]; the Dow remains below its
comparable level.
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.
GLD and TLT were
up, the UUP down. But all their charts
remain strong, reflecting risk aversion among their investors.
Wednesday in the
charts.
Fundamental
Headlines
The
economy
Only a single datapoint
yesterday. Weekly mortgage applications while
purchase applications were up.
Overseas,
the trend in ‘less bad’ numbers continued.
March Japanese machine tool orders and May EU flash consumer confidence
were better than estimates, while April EU CPI was in line and April UK CPI was
slightly lower than anticipated.
The
coronavirus
Update of
coronavirus stats.
Embracing facts
over fear.
Did the lockdown
save lives?
Rationale
exuberance over coronavirus vaccine?
Trust
is being undermined.
The
Fed
The FOMC released
the minutes of its latest meeting. Given
that it was three weeks ago and events have been progressing at warp speed since
then (including a Powell speech and congressional testimony), they are almost
out of date. That said, they provided no
new insights to Fed thinking. Text
below.
The Fed’s middle market
‘Main Street’ lending facility is a disaster.
Why Powell is in
over his head.
No free lunches.
China
The senate ups the
ante again in the US/China faceoff.
Bottom line: most stocks are overvalued. That may not mean that they will decline in
price but, if they don’t, then the only way for investors to earn any kind of
future return would require equities to become even more overvalued. I have difficulty believing that will occur
when (1) there are so many unknowns regarding the magnitude and extent of an
economic recovery, (2) it necessitates investors continued faith in a monetary
policy with no successful historical precedent, (3) the US/China standoff seems
to be getting more unstable daily.
News on Stocks in Our Portfolios
Revenue of $6B (-26.4% Y/Y) misses by $100M.
Medtronic (NYSE:MDT) declares $0.58/share quarterly dividend, 7.4% increase from
prior dividend of $0.54.
Revenue of $2.42B (+3.4% Y/Y) beats by $20M.
Economics
This Week’s Data
US
Weekly
jobless claims rose 2,438,000 versus forecasts of 2,400,000.
The
May Philadelphia Fed manufacturing index came in at -43.1 versus estimates of
-41.5
International
The April Japanese trade balance
was -Y1930 billion versus consensus of -Y560 billion.
May
EU flash consumer confidence was reported at -18.8 versus expectations of -24.
The
May Japanese flash manufacturing PMI was 38.4 versus projections of 36.0; the
services PMI was 25.3 versus 17.5; the composite PMI was 27.4 versus 20.6.
The
May German flash manufacturing PMI was 36.8 versus forecasts of 39.2; the
services PMI was 31.4 versus 26.6; the composite PMI was 31.4, in line.
The
May EU flash manufacturing PMI was 39.5 versus estimates of 38.0; the services
PMI was 28.7 versus 25.0; the composite PMI was 30.5 versus 25.0.
The
May UK flash manufacturing PMI was 40.6 versus expectations of 36.0; the
services PMI was 27.8 versus 25.0; the composite PMI was 28.9 versus 25.0.
Other
What will happen to the $150 million in frozen credit card payments?
What
I am reading today
Aliens likely exist but
they are probably not very smart.
Scientists
discover evidence of a parallel universe.
Quote
of the day.
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