The Morning Call
7/16/20
The
Market
Technical
The Averages (26870, 3226) had another good day, though
volume was down (again) and stocks drew nearer to overbought territory. The Dow finished above its 200 DMA for a
second day (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. It also filled its ‘island
top’ gap intraday, though it fell back at the close. Follow through is the key to judging the
importance of this pin action. Bottom line, the indices charts are improving;
but the Dow needs a little more fuel to revert its 200 DMA to support and
confirm the filling of its ‘island top’.
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, gold was up, the long bond was down (but maintains strong upside
momentum) and the dollar was down. This
collective pin action is consistent with itself and with a weak economic
outlook.
Wednesday in the
charts.
Fundamental
Headlines
The
economy
Yesterday’s data
releases were positive: June industrial production, capacity utilization, the
July NY Fed manufacturing index and weekly mortgage applications were above
expectations while purchase applications declined.
Update on the big
four economic indicators.
In
addition, the Fed released its latest Beige Book, whose main headline was
that the economy is improving but has a
long way to go to get back to prior levels.
The Markets are
walking a dangerous tightrope.
High inflation
and currency devaluation (must read):
Overseas,
the June Japanese trade balance was above estimates but June UK CPI and core CPI were hotter than anticipated.
The
coronavirus
The misreporting
of virus deaths.
More details on
Moderna’s just released vaccine trial.
The
Fed
The Fed’s
liquidity confusion.
***overnight, the
ECB met and, as expected, left rates and its bond purchase program unchanged.
Bottom
line. despite a less than positive news flow, stocks
continue to advance and are a short hair away from a run at their February
highs. If your portfolio does not have decent cash reserves (15% at a minimum; I am
at 50%), now is the time to build them.
Then set back and enjoy the rest of the ride.
The latest from
Bill Gross.
News on Stocks in Our Portfolios
Johnson & Johnson (NYSE:JNJ): Q2 Non-GAAP EPS of $1.67 beats by $0.16; GAAP EPS
of $1.36 beats by $0.18.
Revenue of $18.34B (-10.8% Y/Y) beats by $610M.
Economics
This Week’s Data
US
Weekly
jobless claims were 1,300,000 versus forecasts of 1,250,000.
June
industrial production rose 5.4% versus estimates of +4.3%; capacity utilization
was 68.6 versus 67.7.
June retail sales rose
7.5% versus expectations of +5.0%; ex autos, they were up 7.3% versus +5.0%.
The
July Philadelphia Fed manufacturing index was reported at 24.1 versus
projections of 20.0.
International
May
UK unemployment came in at 3.9% versus consensus of 4.2%; average earnings fell
0.3% versus -0.4%.
June
Chinese unemployment was 5.7%, in line; YoY industrial production was +4.8%
versus 4.7%; YoY retail sales were -1.8% versus +0.3%; YoY fixed asset investment
was -3.1% versus -3.3%; Q2 GDP rose 11.5% versus +9.6%.
Other
Mortgage
delinquencies soar.
What
I am reading today
The
rising trend toward home schooling.
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