The Morning Call
6/12/20
The
Market
Technical
What blow off
top? It would appear that is yesterday’s
story with the Averages (25128, 3002) executing
a Niagara Falls formation.
The negatives:
(1) both of the
indices broke below the lower boundaries of their very short term uptrends; if
they remain there through the close today, those trends will be negated,
(2) the DJIA
finished back below its 200 DMA---the day after it reverted to support; if it remains
there through the close today, it will return to resistance,
(3) the Dow ended
right on its 100 DMA,
(4) the VIX
skyrocketed, ending above the upper boundary of its very short term downtrend;
if it remains there through the close today, that trend will be voided.
The positives:
(1) both closed their
6/5 gap up opens,
(2) while breadth
was terrible but it helped relieve the significantly overbought condition of
the Market.
My assumption
remains that the Market’s bias is to the upside, though clearly yesterday’s pin
action gives me pause. The question is,
where will the indices find support? If
they can hold at the level of their DMA’s, then that assumption will remain
operative. A break below those levels
would point to a retest of the March 23rd lows.
Buy the dip or run
for the hills?
If this doesn’t
convince you that investor psychology has reached the stage of absurd-and-beyond,
then you should participate in the offering.
Otherwise, treat it for what it is---another indication of an irrational
Market.
Gold declined,
leaving open the question as to whether it can reestablish upside
momentum. The long bond rose, finishing
above the last lower high---a big step to regaining upside momentum. The dollar was up, bouncing off the lower boundary
of its short term trading range---a minor victory in an otherwise ugly chart.
Thursday in the
charts.
Fundamental
Headlines
It was another
light day for data. Weekly
jobless claims rose but less than expected while May PPI was much higher than
anticipated though core PPI was in line.
The real economic
catastrophe has not hit yet.
Nothing
overseas.
The
coronavirus
***overnight update.
More than 95% of UK coronavirus deaths had
pre-existing conditions.
The impact of the coronavirus on small
businesses.
The
Fed
The Fed has created a bubble at the expense of
the economy.
The Fed will
bring everything down.
Bottom
line: after a day in which Powell basically said that the Fed would do
everything in its power, in whatever amount necessary, for as long as necessary,
it was a bit of a surprise to me that stock prices would crash. Granted there are other problems for
investors to worry about. But that is
the point---investors’ unconditional faith in the Fed put would suggest those
concerns of lesser importance in the scheme of things. Of course, this may have been a one day phenomenon.
Stay tuned.
The
odds are stacked against the bears.
News on Stocks in Our Portfolios
Economics
This Week’s Data
US
International
April
Japanese industrial production fell 9.8% versus consensus of -9.1%; capacity
utilization was down 13.5% versus down 2.6%.
The
April UK trade balance was +L0.31 billion versus estimates of -L6.2 billion;
industrial production was -20.3% versus -15.0%; manufacturing production was
-24.3% versus -15.8%; GDP was -20.4% versus -18.4%.
April
EU industrial production was down 17.1% versus forecasts of down 20.0%.
Other
Hotel occupancy
down 45% YoY.
The government
says that there is no inflation---except for the things that you buy.
What
I am reading today
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