The Morning Call
6/17/20
The
Market
Technical
The Averages (26289, 3124) made a strong follow through
from Monday’s huge upside turnaround.
The Dow managed to close above the lower boundary of its recently voided
very short term uptrend; however, I am not re-establishing it because the S&P
is still well short of its comparable level.
The Dow also ended right its 200 DMA (now resistance). The bad news is that neither of the indices
has reached a level that would challenge those ‘island tops’.
So at the moment,
the Averages are pinned between the gaps in the ‘island top’ on the upside and
their DMA’s on the downside. But despite
the recent erratic pin action, I am sticking with my assumption that the
Market’s bias is to the upside, questionable though it may be.
A sense of
confusion versus a battle of wills.
Gold declined
again. While its long term technical picture
remains solid, it continues to struggle to reestablish upside momentum. The long bond was down big, fading its
attempt to regain upside momentum. The
dollar also declined, keeping its chart the ugliest of the lot. Their collective pin action yesterday was
confusing and, hence, of little economic or technical informational value.
Tuesday in the
charts.
Fundamental
Headlines
Yesterday’s economic
data was weighed slightly to the positive side.
Month to date retail chain store sales, May retail sales (primary
indicator) and the June housing index were better than anticipated while April
business inventories and May industrial production (primary indicator) were
disappointing.
Update on big four
economic indicators.
Overseas,
June EU and German economic sentiment along with April UK unemployment were
ahead of forecast; May German CPI was in line.
The coronavirus
***overnight
update.
The skeptics were
right.
Millions of jobs
are not coming back.
Study shows steroid
effective against advanced coronavirus.
The
Fed
The great stock
market enabler.
How
far will the Fed let stocks rally before it is too much?
A
little more detail on the Fed’s corporate bond buying program.
China
China/India border
tensions heats up.
Bottom line. A partial fix for
the coronavirus, the Fed promising that QEInfinity is also QEForever, a $1
trillion infrastructure bill. What’s not
to like? I am not sure the news flow can
get much better. On the other hand, (1) we
know that there is plenty of bad news ahead, not the least of which is corporate
earnings, as the aftermath of the coronavirus lockdown becomes manifest yet (2)
equities are fully pricing in yesterday’s headlines.
I
continue to believe that stock prices are heading higher as long as the Fed pumps
liquidity into the financial system. But
valuations are becoming extraordinarily stretched. Something is going to trigger mean
reversion. I do not know what, why or
when; but I would not be chasing stock prices higher and I would continue to
take profits when a holding trades into its Sell Half Range. In the meantime, lay back and enjoy it,
Estimating
future stock returns. (Note. There are plenty
of similar type analysis that are far less optimistic.)
Is the worst in
dividend cuts behind us?
News on Stocks in Our Portfolios
Revenue of $10.44B (-6.3% Y/Y) misses by $240M.
Economics
This Week’s Data
US
Month
to date retail chain store sales declined but at a slower pace than in the prior
week.
Weekly
mortgage applications rose 8.0% and purchase applications were up 3.5%.
April
business inventories declined 1.3% versus forecasts of -0.8%.
May
industrial production rose 1.4% versus estimates of +2.9%; capacity utilization
was 64.8% versus 66.9%.
May housing starts were
up 4.3% versus predictions of 17.5%; building permits were up 14.4% versus
12.4%.
The
June housing index came in at 58 versus expectations of 45.
International
The
May Japanese trade balance was -Y933.4 billion versus projections of -Y970.8
billion.
May
UK CPI was 0.0%, in line; core CPI was 0.0% versus +0.1%.
May
EU CPI was -0.1%, in line.
Other
Freight
index shows little improvement in May.
Inflation
is higher than you think.
What
I am reading today
Happy Birthday Adam
Smith.
Scientists discover mirror image of
sun/earth in deep space.
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for Survival’s website (http://investingforsurvival.com/home)
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