An Analysis of Daily Events that Impact Your Money
Wednesday, June 17, 2020
The Morning Call--How much better can the news flow get?
The Morning Call
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.
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.
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
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.
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,
future stock returns. (Note. There are plenty
of similar type analysis that are far less optimistic.)