Tuesday, June 30, 2020

The Morning Call--You can't keep a Fed fueled Market down

The Morning Call


The Market

The Averages  (25595, 3053) recouped a lot of Friday’s trashing, though volume was weak and breadth mixed.  (1) the S&P voided Friday’s break which put it again out of sync with the Dow; meaning stocks aren’t going to trend in either direction until this condition is corrected, however, (2) both indices are in very short term downtrends and (3) they still have those ‘island tops’ weighing on them.

The short term the technical picture remains shaky; and the indices are stuck in a narrow trading range marked by the upper boundary of their very short term downtrend (on the upside) and their DMA’s (on the downside).  Nonetheless, 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.

            How stocks predict presidential elections.

Gold was up fractionally, maintaining its upward momentum.  The long bond was down slightly but that did not negate its reset to the upside.  The dollar was up one cent.  It was still unable to make a second higher high.  Higher gold and bond prices and a lower dollar suggest a weakening economy.

            Monday in the charts.



            The economy

Yesterday’s two data releases were upbeat.  May pending home sales and the June Dallas Fed manufacturing index were well above estimates.

Overseas, it was just the opposite.  May UK consumer credit, June EU economic sentiment, industrial sentiment, services sentiment and June German inflation were disappointing.  June EU consumer confidence was in line.

            The coronavirus

            Data update (deaths are down).

            Fearmongering in Houston.

            The Swedish experience.  To be fair, this post should also include decline in employment, decline in GDP, increased deaths from untreated ailments and  increased drug, alcohol use and related deaths.


            US/China trade relations get nasty.

                        Another flu virus appears in China.

                        Xi signs national security law for Hong Kong.

                        Forget ‘cooling off’, India and China are building their military presence in disputed area.

The Fed

Powell testifies before the house today.  His prepared remarks have been released.  There is nothing new; but if you want to read them, go for it.

                        Bottom line.  You can’t keep a Fed liquidity fueled Market down.
            No revenues, no profits, no problem.

            Mean reversion is a powerful force.

    News on Stocks in Our Portfolios


   This Week’s Data


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

May pending home sales rose 44.3% versus consensus of up 18.9%.

The June Dallas Fed manufacturing index came in at -6.1 versus estimates of -26.0.


            May Japanese unemployment came in at 2.9% versus forecasts of 2.8%; industrial production fell 8.4% versus down 5.6%; YoY housing starts were off 12.3% versus -15.0%; construction orders were down 6.1% versus -12.3%.

            The June Chinese manufacturing PMI was reported at 50.9 versus expectations of 50.4; the nonmanufacturing PMI was 54.4 versus 52.1.

            Final Q1 UK GDP growth was -2.2% versus projections of -2.0%; business investment was -0.3% versus 0.0%.


            Why Modern Monetary Theory does not work.

            The declining role of the Council of Economic Advisors.

            Six high frequency indicators on the recovery.

What I am reading today

            A brief look at the life of Wyatt Earp.

            Trust the experts.

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