Tuesday, June 23, 2020

The Morning Call--Everyone on board

The Morning Call


The Market

The Averages  (26024, 3117) recovered from Friday’s quad witch sell off.  While breadth showed only weak improvement, the VIX was down almost 10%---meaning the level of investor uncertainty continues to decline.  Unfortunately, the indices remain out of sync on their 200 DMA’s and, at least to date, have been unable to mount a challenge on those ‘island tops’---the longer this goes on, the more likely the next move is to the downside. 

For the moment, I am sticking with my assumption that the Market’s bias is to the upside at least until/unless the Averages revert their DMA’s to resistance.

Gold made another strong move higher, re-establish upside momentum by making a new seven year high.  The long bond was also up but only fractionally.  It will take more to consider that it has broken out of its month long soft spell.  The dollar was down almost five percent, breaking a seven trading day uptrend and remaining in an ugly technical position.
            Monday in the charts.


            The economy

Yesterday’s stats were mixed. The May Chicago Fed national activity index came in well above forecasts while May existing home sales (primary indicator) were very disappointing.

A deeper dive into the current state of the US economy.

Are tariff policies about to change?

Is inflation finally coming?

How rare is a double dip recession?

            Overseas, June EU consumer confidence was slightly below estimates.

            The Fed

            Powell’s potent put.
            Here comes yield curve control.  What does that mean?


China still not buying US soybeans.
            Bottom line.  everyone appears on board with the proposition that the key determinant of stock prices now is Fed policy. Even the bears acknowledge that valuations will continue to rise as a result of the flood of liquidity being pumped into the financial markets by the global central banks---that is, until something breaks.  But they can’t really pinpoint what triggers it or when that will occur.  Their best argument (which I use all the time) is that if something can’t go on forever, it won’t. 

            Which is not really helpful to investors who have to worry about how their assets are deployed.   My solution, which some may consider cowardly, is to (1) stick to my [sell] price discipline, (2) don’t be concerned if you own a heavy position in cash and (3) own a little gold---I added modestly to my holding yesterday.

            Retail investors flood the Market.

            The Market in a sweet spot.

    News on Stocks in Our Portfolios


   This Week’s Data

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

            May existing home sales declined 9.7% versus forecasts of down 3.0%.


            June EU consumer confidence came in at -14.7 versus estimates of -15.0.

            The June Japanese flash manufacturing PMI was reported at 37.8 versus consensus of 47.5; the services PMI was 42.3 versus 40.6; the composite PMI was 37.9 versus 42.4.

            The June German flash manufacturing PMI was reported at 44.6 versus expectations of 41.5; the services PMI was 45.8 versus 42.2; the composite PMI was 45.8 versus 44.2.

            The June EU flash manufacturing PMI was reported at 46.9 versus projections of 44.5; the services PMI was 47.3 versus 41.0; the composite PMI was 47.5 versus 42.4.

            The June UK flash manufacturing PMI was reported at 50.1 versus forecasts of 45.0; the services PMI was 47.0 versus 40.0; the composite PMI was 47.6 versus 41.0.
            Surging PMI’s bolster recovery narrative.


Home mortgage delinquencies reach highest level since 2011.

What I am reading today

            What happens when everyone kneels?

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