Wednesday, July 15, 2020

The Morning Call---And the beat goes on.

The Morning Call


The Market

The Averages  (26642, 3197) had a blockbuster day, though volume was down and stocks are nearing overbought territory.  The Dow finished above its 200 DMA (now resistance; if it remains there through the close on Friday, it will revert to support).  Until the reversion occurs, the indices will remain out of sync.  But clearly this is a positive development.  On the other hand, they are still out of sync with respect to those ‘island tops’ [the S&P filled that gap, the Dow has not].    As I have noted previously, stocks will be directionless until those inconsistencies are corrected.

            Option traders set new speculative record.

Still, the short term the technical picture is improving.  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.
With the other indicators, yesterday was a repeat of Monday---gold was up, the long bond was up and the dollar was down.  This collective pin action is consistent with itself and with a weak economic outlook.

            What is the Treasury market trying to tell us?

Tuesday in the charts.



            The economy

Yesterday was a big one for data.  In the US, the stats were mixed:  month to date retail chain store sales growth and the June small business optimism index were better than expected while the June budget deficit and June CPI were disappointing.


The May UK trade balance and manufacturing production plus the July EU economic sentiment came in ahead of estimates;  May UK industrial production and the June German CPI were in line; May Japanese industrial production, May UK GDP, May EU industrial production, the June Chinese trade balance and July German economic sentiment were below expectations.
            The recovery maybe fizzling.

                        A surge in small business bankruptcies.

                Mohamed El Erian warns that financial stress is far from over.
            The coronavirus

            An opposing view.

                Florida labs admit ‘major error’.

            US/China trade data shows signs of recovery.

            US says China’s ‘island building’ in the South China Sea is unlawful.

            Trump signs China sanctions bill.

            Bottom line.  the beat goes on.  Marginal improvement in the economy; the media and the politicians intent on making matters worse by keeping the economy in lockdown; Trump (correctly) poking the Chinese in the eye; and stock prices soar.  God bless the Fed; at least until this Ponzi scheme collapses.

            July BofA fund manager survey.

            Passive investing and the mispricing of assets.

    News on Stocks in Our Portfolios
            Cummins (NYSE:CMI) declares $1.311/share quarterly dividend, in line with previous.

Procter & Gamble (NYSE:PG) declares $0.7907/share quarterly dividend, in line with previous.


   This Week’s Data


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

            Weekly mortgage applications rose 5.1% while purchase applications declined 6.1%.

            The July NY Fed manufacturing index came in at 17.2 versus consensus of 10.0.


            The June Japanese trade balance was +$1.278 billion versus expectations of +$1.11 billion.

            June UK CPI was up 0.1% versus estimates of 0.0%; core CPI was +0.2% versus -0.1%.


            Leading index for commercial real estate declined in June.

What I am reading today

The social security funding crisis has arrived.

            Quote of the day.

            Who is making decisions about our lives?

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