Wednesday, July 1, 2020

The Morning Call--Bad news is irrelevant

The Morning Call


The Market

The Averages  (25812, 3100) kept the rally going.  Volume remained weak; but breadth did improve.  (1) the indices remained out of sync on their 200 DMA’s [Dow below, S&P above], (2) the Dow ended above the upper boundary of its very short term downtrend; if it remains there through the close today, it will void that trend.  However, the S&P finished below its comparable trend.  So, the Averages are now out of sync on two resistance/support levels.  As I have noted previously, stocks will be directionless until those inconsistencies are corrected 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.
Gold was up, setting another new seven year high. The long bond was down slightly but that did not negate its reset to the upside.  The dollar was also down.  It continues unable to make a second higher high. 

            Tuesday in the charts.



            The economy

            Yesterday’s stats were mostly upbeat.  Month to date retail chain store sales, the April Case Shiller home price index and June consumer confidence were better than anticipated while the June Chicago PMI came in below estimates.

Overseas, the numbers were mixed.  On the plus side, May Japanese housing starts and construction orders and May Chinese manufacturing and nonmanufacturing PMI’s were above expectations.  Negatively, May Japanese unemployment and industrial production along with final Q1 UK GDP growth and business investment were below forecasts.

            The Fed

            The Fed is now a large holder of US bond ETF’s.

                The coronavirus

                The latest media scare story.

                The next six days will be crucial.

                Lives versus jobs.


            China ends ‘one state, two systems’.

                Bottom line.  QEInfinity/Forever is with us for as far as the eye can see.  So far, events related to the coronavirus, the riots and the India/China confrontation have proven irrelevant to stock prices.  Until that changes, valuations will get richer.

            The necessity of enduring volatility.

    News on Stocks in Our Portfolios
General Mills (NYSE:GIS) declares $0.49/snare quarterly dividend, in line with previous.


   This Week’s Data


            Weekly mortgage applications fell 1.8% while purchase applications were down 1.3%.

            The April Case Shiller home price index rose 0.9% versus estimates of +0.4%.

            The June Chicago PMI came in at 36.6 versus expectations of 45.0.

            June consumer confidence was reported at 98.1 versus consensus of 91.8.

                The June ADP private payroll reports showed job increases of 2,369,000 versus forecasts of 3,000,000.  However, the big number was the May revision from a loss of 2,800,000 jobs to a gain of 3,065,000.


            May German retail sales rose 13.9% versus predictions of 3.9%; its June unemployment rate was 6.4% versus 6.6%.

            The final June Japanese manufacturing PMI was reported at 40.1 versus projections of 37.8; the German PMI was 45.2 versus 44.6; the EU PMI was 47.4 versus 46.9; the UK PMI was 50.1, in line.

            June Japanese consumer confidence was 28.4 versus estimates of 30.0.


            Median household income in May.

What I am reading today

            How to live in a world gone mad?

            Enough is enough.  What are you going to do about it?

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