Tuesday, July 21, 2020

The Morning Call--February highs now in sight

The Morning Call


The Market

The Averages  (26680, 3251) advanced yesterday.  The S&P pushed above its June high, voiding that double top that was forming and leaving it open to a challenge of its February all time high (3393).  However, the Dow was still been able to fill its ‘island top’ on a closing basis much less pierce its June high.  Until it does so, it could act as a drag on the S&P.  On the other hand, the VIX finished below its 200 DMA for a second day; a successful challenge would open the way to filling the February gap up open---support for the S&P.  I am sticking with my assumption that the Market’s bias is to the upside.

Gold was up, making a new nine year high.  The long bond was also up, keeping its upward momentum going.  The dollar declined, ending below the lower boundary of its short term trading range (if it remains there through the close on Wednesday, it will reset to a downtrend).  All this suggests a weak economy.

            Monday in the charts.



              The Economy


The June Chicago national activity index came in at 4.11 versus expectations of 3.2.

Month to date retail chain store sales grew more slowly than in the prior week.


                          June Japanese CPI was 0.1%, in line.

What happens if the government ceases to pay the $600/week unemployment benefit?

                                   Update on six high frequency indicators of the economy.

                                   Never has so much been given to so many in so short a time.
                                   Commercial mortgage delinquencies near record levels.

                                   The coming rent-pocalypse and its impact on inflation.
                 The coronavirus

                   The race for a vaccine.

                 Fiscal Policy

                   GOP draft of new stimulus bill.

                         EU nears agreement on stimulus package.

                 The Fed

                 Trump nominee for Fed Board up for senate vote this week.
            Bottom line.  the news from AstraZeneca (see above) is a clear plus for the economy and Americans’ health; the big question is, will a vaccine come soon enough to save the millions of businesses (and their employees) that are on the edge of bankruptcy if they are not already there.  So too the EU and US preparations to throw more money at their respective economies are a positive, at least in the short term.  But all those funds (1) have to be financed, which just means more QEInfinity/Forever and (2) have to be serviced [interest cost], adding to the debt/GDP ratio that is already at a level to act as a governor on economic growth.

            Investors are impervious to the need to pay the piper.

            Irrational exuberance.

            Is value investing really dead?

    News on Stocks in Our Portfolios
            Johnson & Johnson (NYSE:JNJ) declares $1.01/share quarterly dividend, in line with previous.

What I am reading today

            The most prosperous ancient nation that you never heard of.

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