Monday, July 13, 2020

Monday Morning Chartology

The Morning Call


The Market

            The S&P’s technical picture has improved in the last week.  It bounced off its 200 DMA (the Dow is still below) and closed the gap created by the ‘island top’ (the Dow hasn’t).  In addition, it has made several higher lows.  On the negative side, (1) as noted, the Dow has not witnessed similar progress and (2) it has also made a lower high.  Despite the pessimism expressed below, my assumption remains that momentum will remain to the upside until the S&P reverts its DMA’s to resistance.

            What are they thinking about?

            Most stocks topped a month ago.



                While the long bond is not back to its all-time price high, it is still in a six week uptrend, above both DMA’s and the upper boundaries of uptrends across all timeframes.  So, the trend to higher prices (lower yields) remains firmly in place.  

                GLD (169.19) is clearly on a sizz, with no resistance to a challenge of the upper boundary of its long term trading range (~185.85).  I expect it to at least reach that level if not successfully overcoming it.  As long as interest rates are falling (bond prices rising; see above) and the dollar is weakening (see below), gold should continue to do well,

                The dollar maintained its downward trajectory, finishing below both DMA’s, in a very short term downtrend and is nearing a challenge of the lower boundary of its short term trading range.  If it successfully does so, then the next support level is the lower boundary of its intermediate term uptrend---the purple line just visible in the lower right hand corner of the chart.

                The VIX’s chart pretty well mirrors that of the Dow; so, it is not as supportive of the S&P (a wider survey of equities) as it could be.   

                Friday in the charts.



            The economy

            In the week of 6/29, the US stats were slightly downbeat while there were two negative primary indicators and one positive.  Overseas, the data was overwhelmingly constructive.

            In the week of 7/6, the US numbers were very positive while the international stats were quite discouraging.

            Update on Q2 GDP growth forecast.

            I think that these data reflect the impact of the second wave of the coronavirus.  They certainly draw into question the ‘V’ shaped rebound, leaving us to debate whether we will have a U, W, L, swoosh or no recovery.  Short term, that will continue to depend of the swiftness with which a vaccine is developed.  Longer term, nothing alters my below average secular economic growth rate forecast.

            Neither monetary nor fiscal policy will help (must read).

                The world is drowning in debt.

            The coronavirus

            ***overnight update.

Stanford expert says 85% of Texas hospitalizations have nothing to do with the coronavirus.
            It still looks like Sweden got it right.

            What economists can teach epidemiologists.

            Green shoots.

            What the next stimulus bill may look like.

            The Fed

            Game over.

                Another deflationist capitulates.

            Trump says Phase 2 US/China trade deal unlikely.

            Bottom line.  threats to the bullish thesis have grown.

    News on Stocks in Our Portfolios


   This Week’s Data




            Used vehicle prices spike.

What I am reading today

            China/Iran megadeal.

                Quote of the day.

            Harper’s ‘bizarre’ letter.

            DNA research supporting Kon-Tiki.

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