The Morning Call
6/10/20
The
Market
Technical
The Averages (27272, 3207) did a bit of consolidating
yesterday. However, both of the indices
remain in very short term uptrends and the DJIA finished above its 200 DMA for
a third day (now resistance; if it remains there through the close today, it
will revert to support). While one down
day does not void a blowoff top, any interruption needs to be limited. Meanwhile, (1) the two huge gap opens (5/18,
6/5) remain unfilled, (2) the indices remain solidly in overbought territory
and (3) the VIX continues to reflect growing investor uncertainty [it is now on
the verge of breaking above the upper boundary of its very short downtrend].
Margin again on the
rise.
Retail rampage
continues.
Warning signs.
Gold had another
good day and has almost reestablished its upside momentum---‘almost’ being the
operative word. Ditto with the long
bond---price up and, in the process, negating last Friday’s break below its 100
DMA. But it still has work to do to regain
upside momentum. The dollar was down
again on volume; its chart getting uglier by the day.
Is the Treasury
market starting to price in reflation?
Tuesday in the
charts.
Fundamental
Headlines
Yesterday’s
stats were mixed. Month to date retail
chain store sales were disappointing, the April (JOLTS) report was in line and April
wholesale inventories/sales were a big plus.
OECD warns of
deep global downturn.
The World Bank
paints an equally grim future.
Overseas, April
Japanese YoY cash earnings, May YoY machine tool orders and the April German
trade balance were less than anticipated while Q1 final EU GDP was better and
its unemployment rate was in line.
The
coronavirus
***overnight
update.
The
Fed
The latest FOMC
meeting started yesterday and will wrap up today. There has been talk that the Fed may introduce
‘yield curve control’ as a new policy tool.
Here is a discussion of what it is and its impact historically on the
markets.
When will the Fed
realize that it has broken the Market’s pricing mechanism?
Bottom line. barring an unexpectedly damaging second wave
of the coronavirus, the economy is likely through the worst of the
recession. However, as I continue to
note, we still have no idea what the lockdown’s 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. Invest accordingly.
P.S.
if I were fully invested, I would be desperately seeking sell candidates. Conversely, if I had more cash than I might
want, I would definitely NOT be chasing stocks up.
The latest from
Doug Kass.
https://www.zerohedge.com/markets/todays-dash-trash-has-historical-precedent-and-sub-optimal-outcome
You are not smarter
than Stanley Druckenmiller.
https://moneymaven.io/etf/macro/you-re-not-smarter-than-stanley-druckenmiller-dBB6DZNE-E6LiC4eA-3kdg
News on Stocks in Our Portfolios
Economics
This Week’s Data
US
Month
to date retail chain store sales fell at a faster pace than last week.
The
April job openings report (JOLTS) showed 5.05 million openings versus estimates
of 5.0 million.
April wholesale
inventories rose 0.3% versus expectations of +0.4%; and that is with sales
falling 16%.
Weekly mortgage
applications were up 9.3%, purchase applications up 5.3%.
May CPI came in
down 0.1% versus forecasts of 0.0%; core CPI was also down 0.1%, also in line.
International
April
Japanese machinery orders decline 12.0% versus projections of down 8.6%; May PPI
was -0.4% versus -0.3%.
May
Chinese CPI was -0.8% versus consensus of -0.5%.
Other
US exports to
China jump in April.
Rail
traffic versus rail stocks.
What
I am reading today
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