The Morning Call
7/13/20
The
Market
Technical
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.
Unsustainable.
Counterpoint.
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.
Fundamental
Headlines
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.
China
Trump says Phase 2
US/China trade deal unlikely.
Bottom line. threats to the bullish thesis have grown.
News on Stocks in Our Portfolios
Economics
This Week’s Data
US
International
Other
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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