The Morning Call
7/14/20
The
Market
Technical
The Averages (26085, 3155) had a volatile day but ended basically
flat (Dow up slightly, S&P down slightly).
Volume was up; and breadth was OK.
The indices remained out of sync on (1) their 200 DMA’s [Dow below---intraday,
it moved above its 200 DMA but failed to hold it; S&P above] and (2) those ‘island
tops’ [the S&P filled that gap, the Dow has not]. 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.
Still, the short
term the technical picture has improved.
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, maintaining
its move to ever higher seven year highs. The long bond was also up and the
dollar was down. This collective pin
action is consistent with itself and with a weak economic outlook.
A negative view of
gold.
Monday in the
charts.
Fundamental
Headlines
The
economy
Only one datapoint
released yesterday. The US June budget
deficit was marginally larger than anticipated.
An improved growth
outlook from Wall Street.
Six high frequency
indicators of recovery.
The default wave
arrives.
The
coronavirus
US
death rate rising; but a third of it is unrelated to the coronavirus.
The
Fed
The Fed’s $3
trillion coronavirus rescue has created multiple market bubbles.
The
Fed releases its purchase schedule for the next two weeks.
Dallas
Fed chief says Fed purchases will be cut back as economy improves.
The
Fed is trapped in QE.
China
Trump planning to
scrap audit deal for US listed Chinese firms.
UK
bars Huawei from supplying 5G network.
China warns of sanctions
against Lockheed Martin following arms deal.
Bottom
line. valuations are extremely generous though (1) the
media insists on emphasizing the worst case for the coronavirus which is not
being helped by the politicians [California in new lockdown], (2) the
macroeconomic data is improving although a ‘V’ shaped recovery is a stretch; indeed,
the lockdown which is returning as the preferred anecdote to the coronavirus is
wrecking whole segments of the economy (3) Q2 earnings season began yesterday
and expectations are abysmal. And yet, the
indices and many stocks are a short hair away from their all-time highs.
Investors
owe it all to QE. And, at the moment, it
appears that they have nothing to fear regarding a reversal of this
extraordinarily irresponsible policy. I
sleep well because of my large cash position; but I clearly enjoy higher stock
prices.
This is nuts……..again.
Knowing when you
have won.
Don’t fall in love
with your stocks.
Wall Street concludes
that it is bullish whoever wins in November.
News on Stocks in Our Portfolios
Economics
This Week’s Data
US
The
June budget deficit was $864 billion versus forecasts of $863 billion.
June
CPI came in at +0.6% versus consensus of +0.5%; core CPI was +0.2% versus
+0.1%.
The
June small business optimism index was reported at 100.6 versus estimates of
92.0.
International
May
Japanese industrial production fell 8.9% versus expectations of -8.4%.
The
May UK trade balance was +L4.3 billion versus projections of -L0.8 billion; industrial
production was +0.6%, in line; GDP grew 1.8% versus 5.5%; manufacturing
production was up 8.4% versus 8.0%.
May
EU industrial production was up 12.4% versus predictions of +15.0%; July
economic sentiment came in at 59.6 versus 51.0.
The
June Chinese trade balance was $46.4 billion versus forecasts of $58.6 billion.
The
June German CPI was up 0.6%, in line; July economic sentiment was 59.3 versus
60.0.
Other
The
collapse of the oil and gas industry.
What
I am reading today
Yesterday in the interest of political
correctness, the Washington Redskins management is renaming the team. Here are some other more descriptive suggestions:
“The Washington Lobbyists.” “The Washington Special Interests.” “The Washington
Underpaid Holders of Useless Masters’ Degrees Working at NGOs.” “The Washington
Logrollers.” “The Washington Vulnerable Incumbents.” “The Washington Expense
Accounts.” “The Washington Blusterers.” “The Washington Anonymous Sources.”
“The Washington Backstabbers.” “The Washington Midlevel Bureaucrats.” “The
Washington GS-13s.” “The Washington Gridlock.” “The Washington Demagogues.” For
my academic friends, “The Washington Rent-Seekers.”
The anniversary
of the Northwest Ordinance.
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