Wednesday, June 3, 2020

The Morning Call---Blow off top?

The Morning Call


The Market

The Averages  (25742, 3080) maintained their upward momentum.  Both of the indices remain in very short term uptrends.   The S&P has now successfully challenged both its 100 and 200 DMA’s (now support).  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).  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.

                        Fragility is off the charts.

GLD was off but its chart remains strong.  TLT was down, ending below the upper boundary of its intermediate term uptrend---not necessarily a negative but a sign of the loss of upside momentum; while the dollar was whacked again, finishing below (1) the lower boundary of its short term uptrend for the third day, resetting to a trading range and (2) both its 100 and 200 DMA, both having reverted to resistance. This pin action is pointing to a risk off scenario (a little bit less so for GLD), though it is clearly at odds with stocks.

            The case for gold.

                The dollar declines as risk on trade gains momentum.

                        Tuesday in the charts.



            The economy

            Only one datapoint reported yesterday. Month to date retail chain store sales declined at a slower pace than in the prior week.

            The latest CBO economic forecast.

            The latest Atlanta Fed nowcast.

There is nothing normal about the savings rate.

            The coronavirus

            The real looters are the politicians.

            Overdoses spike in Chicago amid coronavirus lockdown.

                Banks brace for surge in defaults.
           The Fed

            Mohamed El Erian slams the Fed (must read)
            China launches QE.


            The US declaration of (cold) war.

            Update on US/China trade.

            Bottom line.  this Market has a lot of the signs of some kind of blow off top.  I don’t know if the indices can make all the way back of their former highs; but it sure looks like higher stock prices are in the cards.  In my opinion, this is an extremely risky time to be buying stocks.  All my attention is focused on our holdings that at nearing their Sell Half ranges.

            The spring 2020 update on S&P 500 earnings.

            Update on valuations.

    News on Stocks in Our Portfolios
Donaldson (NYSE:DCI): Q3 GAAP EPS of $0.50 beats by $0.12.
Revenue of $629.7M (-11.7% Y/Y) beats by $23.69M.


   This Week’s Data


            Weekly mortgage applications dropped 3.9 while purchase applications rose 5.3%.

            Month to date retail chain store sales declined at a slower pace than in the prior week.

            April construction spending fell 2.9% versus estimates of -6.5%.

            The May ADP private payroll report showed a job loss of 2,960,000 versus forecasts of 9,000,000.


            The May EU final manufacturing PMI came in at 36.6 versus forecasts of 36.8; the services PMI was 30.5 versus 28.7; the composite PMI was 31.9 versus 30.5; the April unemployment rate was 7.3% versus 8.2%; April PPI was -2.0% versus -1.8%.

The UK May final manufacturing PMI was 40.7, in line; the services PMI was 29.0 versus 28.0; the composite PMI was 30.0 versus 28.9.

The May German final services PMI was 32.6 versus expectations of 21.4; the composite PMI was 32.3 versus 31.4; the May unemployment rate was 6.3% versus 6.2%.

The May Japanese final services PMI was 26.5 versus projections of 25.3; the composite PMI was 27.8 versus 27.4.

The May Chinese Caixin final services PMI was 55.0 versus estimates of 48.6; the composite PMI was 54.4 versus 49.1.


            Framing lumber futures prices rise.

            Update on oil.
What I am reading today

            Photos of the works of Christo.

            Why we are blind to probability.

            The real reason social security is in trouble.

                The benefit of talking an idea out.

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