Thursday, June 4, 2020

The Morning Call---The ECB cranks up the volume

The Morning Call


The Market

The Averages  (26269, 3122) had another great day. Both of the indices remain in very short term uptrends.   The Dow finished above its 100 DMA for a third day, reverting to support (and joining the S&P in doing so).  The one negative is those huge 5/18 gap opens that remain unfilled but which, at the moment, appear irrelevant.  My assumption continues to be that equity prices’ bias is to the upside though they are getting overbought.

GLD was off, ending right on the upper boundary of its short term uptrend---not necessarily a negative but a sign of the loss of upside momentum.  Meanwhile, the long bond made a new lower low and setting a new very short term downtrend.  Ditto, the dollar.  It got hammered on huge volume and set a new very short term downtrend. It appears these investors believe the economy is recovering robustly.

            Wednesday in the chart.



            Yesterday’s stats were upbeat. April factory orders, April construction spending, the May ISM nonmanufacturing index and the May ADP private payroll report were better than anticipated while weekly mortgage/purchase applications were mixed.

            Overseas, the May EU final manufacturing PMI, the May final EU, UK, German, Japanese and Chinese  services and composite PMI’s plus the April EU unemployment rate were better than estimates while the April EU PPI and the May German unemployment rate were disappointing.

            The coronavirus

            ***overnight update.

            Update on US coronavirus stats.

            Global update on the coronavirus.

            How we got in this mess.

            Some facts worth knowing.
            The Fed

            ***overnight, the ECB cranks up the volume.

            The Fed faces a day of reckoning.

            The limits on monetary policy.

                Fed expands muni bailout facility.

                Bill Dudley steps on his dick, again.

            Trump imposes restrictions on Chinese media.

                Trump bars Chinese passenger plane flights to US.

                UK considers offering citizenship to Hong Kong residents.

Bottom line.  the economy appears to be stronger than had been expected; but that does not mean it will avoid a deep recession.   But we still have no idea what the lockdowns ultimate impact will be on American’s spending, social and work habits. 

And yet, investors are tip toeing through the tulips. To me the only explanation for this total breakdown of the relationship between price and value is QE; and I have no clue when and how this disconnect corrects itself.  For the moment, as I said yesterday, the Market’s pin action has similarities to a blow off top.  Invest accordingly.

            More on valuations.

    News on Stocks in Our Portfolios
            General Dynamics (NYSE:GD) declares $1.10/share quarterly dividend, in line with previous.


   This Week’s Data


            Weekly jobless claims increased 1,877,000 versus projections of 1,800,000.

            Q1 nonfarm productivity came in at down 0.9% versus expectations of -2.7%; until labor costs rose 5.1% versus 5.0%.

            April factory orders fell 13% versus estimates of -14%; ex transportation, they were -8.5% versus -9.0%.

            The April trade balance was -$49.4 billion versus consensus of -$49.0 billion.

            The May ISM nonmanufacturing index came in at 45.5 versus forecasts of 41.8.


            April EU retail sales fell 11.7% versus expectations of -15.0%.

            The May EU construction PMI was 39.5 versus projections of 34.0; the UK construction PMI was 28.9 versus 29.7


What I am reading today

            Dealing with uncertainty, Part 2.

            How big it the racial wealth gap?

            Why we can’t learn from history.

            Organized looters.

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