Monday, August 31, 2020

Monday Morning Chartology

 

The Morning Call

 

8/31/20

 

The Market

         

    Technical

 

            The S&P had quite a week, starting with a gap up open on Monday, resetting its short and intermediate term trends from trading ranges to uptrends and having its 100 DMA crossing above its 200 DMA.  All this clearly supports my assumption that the Market’s bias is to the upside.  That said, there are some negatives that point to some sort of short term correction: (1) the S&P now has three gap up opens below it that need to be filled, (2) the VIX continues to reflect investor concern and (3) the index’s breadth remains in overbought territory while the rest of the Market weakens.

            https://www.zerohedge.com/markets/tale-two-bull-markets

 


            The long bond had as bad a week as the S&P had good.  It has fallen out of the uptrend off its March/June low’s, established a very short term downtrend having made two lower highs and remained below its 100 DMA (now resistance).  That said, short term it has that huge gap down open overhead that needs to be filled; and long term, it remains in uptrends across all time-frames.  The only way that I can reconcile declining bond prices  with rising gold prices and a falling dollar is significantly higher inflation.

 


            As you can see, GLD has been trading in an increasingly narrowing wedge formation.  In fact, on Friday, it closed right on the upper boundary of that formation.  The new Fed monetary policy and a weakening dollar suggest a break to the upside. 

 


            Did I just say, ‘a weakening dollar’?

 


            Technically, the VIX’s chart should look roughly like an upside down S&P/Dow chart.  But as I have been pointing out for the last two weeks, it hasn’t.  That suggests that there are enough investors that are growing increasingly uncertain/risk averse.

            https://www.zerohedge.com/markets/whats-behind-last-weeks-meltup-vix-citadel-explains

 


            Friday in the charts.

            https://www.zerohedge.com/markets/powell-promises-push-sp-best-august-1986-dollar-bonds-puked

 

    Fundamental

 

       Headlines

 

              The Economy

 

                        Last Week in Review

 

The data (and primary indicators) last week was (very) upbeat again, keeping alive the prospects of a ‘V’ recovery, or at least something close.  I am not there yet; but the recent improvement in the numbers cannot be ignored.  In further good news, the international stats were also positive, which has not been the case for several weeks.  Still, I will take good news where I can get it.  Let’s hope it continues as it would be a plus for us.

 

Intermediate term, the economic growth will be influenced by how quickly virus treatments and a vaccine are discovered as well as the permanent impact this disease/government reaction will have on the spending and work habits of the nation. 

 

Whatever the shape of the recovery, I am not altering my belief that long term the economy will grow at a historically subpar secular rate due to the twin burdens of egregiously irresponsible fiscal and monetary policies---which, by the way, are becoming even more egregiously irresponsible as a result of measures being taken by the government and the Fed in dealing with the current crisis.

 

                        US

 

                        International

 

July YoY Japanese housing starts fell 11.4% versus estimates of -12.5%; YoY construction orders were down 22.9% versus -7.0%.

 

August Japanese consumer confidence came in at 29.3 versus expectations of 29.0.

 

The August Chinese manufacturing PMI was reported at 51.0 versus consensus of 51.2.

 

                        Other

 

                          A quarter of all personal income in the US comes from the government.

                          https://www.zerohedge.com/markets/quarter-all-personal-income-us-comes-government

 

                          Subprime mortgages fall massively delinquent.

                          https://www.zerohedge.com/personal-finance/subprime-mortgages-fall-massively-delinquent-leaving-taxpayers-hook-housing-market

 

                          Former Fed official warns of double dip.

                          https://www.zerohedge.com/economics/former-fed-official-warns-double-dip

 

                                  The fiscal cliff is coming right up.

                          https://www.zerohedge.com/personal-finance/devastating-consumer-financial-cliff-coming-right

 

            The Fed. 

           

              The social and economic side effects of negative interest rates.

   https://www.zerohedge.com/markets/social-and-economic-side-effects-negative-interest-rates

 

            The coronavirus

 

              The first US reinfection case.

              https://www.zerohedge.com/geopolitical/nevada-lab-confirms-first-case-covid-19-reinfection-documented-us

 

    News on Stocks in Our Portfolios

 

 

 

What I am reading today

 

            Quote of the day.

            https://cafehayek.com/2020/08/quotation-of-the-day-3267.html?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+CafeHayek+%28Cafe+Hayek%29

 

                        How to survive when you are the target of an angry mob.

            https://www.zerohedge.com/political/how-survive-when-youre-target-angry-mob

 

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Friday, August 28, 2020

The Morning Call--Fed policies are part of the problem

 

The Morning Call

 

8/28/20

 

The Market

         

    Technical

 

The Averages  (28492, 3484) continued to climb and for the first time in a number of days, on higher volume.  But there remain a number of negatives (1) on Monday, both of the indices made a gap up open, joining those two gap up opens made three weeks ago, (2) the VIX continues to reflect investor concern [it was actually up yesterday on a stock price up day for the second day in a row] (3) the indices’ breadth remains in overbought territory while the rest of the Market weakens. So, there are good reasons to expect a selloff.  Nonetheless, I am sticking with my assumption that the Market’s bias remains to the upside long term.

           

Gold retreated below the uptrend off its June low---the first negative indicator in a long time.  TLT was hammered (down 1 ¾%), again, on increased volume.  The bad news is that it remains below its 100 DMA (now resistance) and has now made a lower high.  The good news is that on Tuesday, it created a huge gap down open that needs to be filled.  The dollar rallied but not enough break even the very shortest term downtrend.  The cumulative pin action is pointing to an improving economy/higher rates.   

 

            Divergences everywhere.

            https://www.zerohedge.com/markets/correction-watch-divergences-are-developing-between-large-us-stocks-everything-else

 

            Thursday in the charts.

            https://www.zerohedge.com/markets/powell-pelosi-pentagon-pummel-stocks-bonds-bullion

 

    Fundamental

 

       Headlines

 

              The Economy

 

                        US

 

                          July pending home sales rose 5.9% versus forecasts of +3.0%.

                          https://www.advisorperspectives.com/dshort/updates/2020/08/27/pending-home-sales-rise-5-9-in-july

 

July personal income was up 0.4% versus estimates of up0.2%; personal spending was up 1.9% versus 1.5%.

 

The July trade balance was -$79.3 billion versus expectations of -$73 billion.

July wholesale inventories declined 0.1% versus projections of -0.6%.

 

The August Kansas City Fed manufacturing index came in at 23 versus consensus of 2.

                          https://www.advisorperspectives.com/dshort/updates/2020/08/27/kansas-city-fed-survey-manufacturing-activity-rose-in-august

 

                        International

 

August Japanese CPI was up 0.3% versus predictions of up 0.6%, core CPI was up 0.3%, in line.

 

August EU consumer confidence came in at -14.7, in line; economic sentiment was 87.7 versus 85.0; industrial sentiment was -12.7 versus -14.4; services sentiment was -17.2 versus -24.4.

 

September German consumer confidence declined 1.8% versus estimates of +1.2%.

 

                        Other

 

                          America’s coming double dip (must read from Stephen Roach).

                          https://www.zerohedge.com/markets/americas-coming-double-dip

 

                          Hotel occupancy down 30% YoY.

                          https://www.calculatedriskblog.com/2020/08/hotels-occupancy-rate-declined-303-year.html

 

                          Quality adjusted price inflation in much higher than measured.

                          https://marginalrevolution.com/marginalrevolution/2020/08/the-quality-adjusted-rate-of-price-inflation-is-much-higher-than-measured.html

 

            The coronavirus

 

              The latest fatalities stats.

              http://econbrowser.com/archives/2020/08/cdc-covid-19-fatality-count-and-excess-deaths

 

               Most Americans are misinformed on the coronavirus.

              https://www.usatoday.com/story/opinion/2020/08/26/covid-19-misinformed-americans-too-scared-too-careless-column/3430354001/

 

              The Gallup Pool shows public school enrollment will decline by 76%-83%.

              https://nalert.blogspot.com/2020/08/the-gallup-poll-finds-that-public.html

 

I am not sure that the government/single payer approach is the right one for solving the health insurance problem; but the pandemic spotlights a huge problem that has to be addressed.

              https://www.nakedcapitalism.com/2020/08/threadbare-us-system-denounced-as-study-shows-12-million-lost-employer-tied-health-care-during-pandemic.html

 

            The Fed

 

              Summation of Powell’s Jackson Hole address (must read).

              https://www.zerohedge.com/markets/after-inflation-targeting-heres-what-fed-will-do-next

 

              Just how easy has Fed monetary policy been this year?

              https://www.themoneyillusion.com/the-fed-hasnt-done-much-monetary-stimulus-this-year/

 

            Bottom line.  Fed policies are part of the problem.

            https://www.zerohedge.com/markets/one-bank-finally-tells-truth-fed-policies-have-become-part-problem

 

  A bear market still lurks.

              https://www.advisorperspectives.com/commentaries/2020/08/27/march-was-a-correction-bear-market-still-lurks

 

              Ultra rich stockpile cash.

              https://www.advisorperspectives.com/commentaries/2020/08/27/ultra-rich-tiger-21-stockpiles-cash-as-u-s-economy-fears-grow

 

              Lessons from long term Market returns.

              https://novelinvestor.com/peter-bernstein-lessons-from-long-run-market-returns/

 

    News on Stocks in Our Portfolios

 

 

 

What I am reading today

 

            Claiming social security during the pandemic.

            https://www.usatoday.com/story/money/2020/08/26/the-smart-way-to-claim-social-security-benefits-during-the-coronavirus-pandemic/113460080/

 

Visit Investing for Survival’s website (http://investingforsurvival.com/home) to learn more about our Investment Strategy, Prices Disciplines and Subscriber Service.

 

 

 

Thursday, August 27, 2020

The Morning Call--The damage to the economy is permanent

The Morning Call

 

8/27/20

 

The Market

         

    Technical

 

The Averages  (28331, 3478) resumed their advance with the S&P’s 100 DMA crossing above its 200 DMA---a positive technical signal.  But there remain a number of negatives (1) volume was down again, (2) on Monday, both of the indices made a gap up open, joining those two gap up opens made three weeks ago, (3) the VIX continues to reflect investor concern [it was actually up yesterday on a stock price up day] (4) the indices’ breadth remains in overbought territory while the rest of the Market weakens. So, there are good reasons to expect a selloff.  Nonetheless, I am sticking with my assumption that the Market’s bias remains to the upside long term.

 

            Changes in the Dow.

            https://www.washingtonpost.com/business/2020/08/25/dow-jones-industrial-average-index-change/

 

Gold spiked 1 1/8%, remaining in the uptrend off its June low.  TLT dropped again.  The bad news is that it ended below its 100 DMA (now resistance); the good news is that on Tuesday, it created a huge gap down open that needs to be filled.  The dollar continued to sell off, having just made a lower high.   

 

            Wednesday in the charts.

            https://www.zerohedge.com/markets/global-stocks-hit-record-high-gold-spikes-ahead-powell-speech

 

    Fundamental

 

       Headlines

 

              The Economy

 

                        US

 

The second estimate of Q2 GDP growth was -31.7% versus estimates of -32.5%; corporate profits declined 11.8% versus -26.0%; the PCE price index was -1.8% versus -1.9%; the core PCE price index was -1.0% versus -1.1%.

                          https://www.zerohedge.com/markets/record-gdp-plunge-revised-slightly-higher-us-economy-contracted-317-q2

 

                          Weekly jobless claims rose 1,006,000 versus expectations of 1,000,000.

                          https://www.zerohedge.com/personal-finance/initial-jobless-claims-above-1-million-again-last-week

 

                        International

 

                        Other

 

                          Jobs are a cost not a benefit.

                          https://www.adamsmith.org/blog/jobs-are-a-cost-not-a-benefit-1

 

                          The inflation cocktail is being mixed.

                          https://www.advisorperspectives.com/commentaries/2020/08/25/the-inflation-cocktail-is-being-mixed

 

            The coronavirus

 

              ***overnight update.

              https://www.zerohedge.com/geopolitical/fda-approves-abbott-labs-rapid-covid-19-test-outbreaks-us-brazil-africa-see-sharp

 

              Unintended consequences of the lockdown.

              https://fee.org/articles/4-life-threatening-unintended-consequences-of-the-lockdowns/?utm_source=email&utm_medium=email&utm_campaign=2020_FEEDaily

 

              A nationwide study of hydroxychloroquine therapy and its results.

              https://www.sciencedirect.com/science/article/pii/S0924857920303423?via%3Dihub

 

              Chinese coronavirus test kits yielding false positive results.

              https://www.zerohedge.com/medical/thousands-swedes-receive-false-positive-covid-19-results-due-faulty-test-kits-china

 

            China

 

              The decoupling of the US/Chinese economies is still a long way away.

              https://www.cnbc.com/2020/08/26/former-imf-china-head-us-china-economic-decoupling-is-a-long-way-away.html

 

              On the other hand, the saber rattling continues.

              https://www.zerohedge.com/geopolitical/china-fires-two-missiles-sea-warning-united-states-biggest-escalation-yet

 

              Counterpoint.

              https://www.zerohedge.com/geopolitical/us-china-relations-believing-pigs-can-fly           

 

            The Fed

 

              Score another one for a clueless Fed.

              https://www.zerohedge.com/markets/earth-fed-inflation-mandate-has-been-met

 

              Part 2: Convincing the public that even higher inflation is good for it.

              https://www.zerohedge.com/markets/powell-faces-complete-nightmare-convincing-public-higher-inflation-good-them

 

            Bottom line.  The damage to the economy is permanent.

              https://www.zerohedge.com/markets/gold-perfect-hedge-dimartino-booth-warns-damage-economy-permanent

 

              The decline in consumer confidence makes the S&P all-time high hard to justify.

              https://247wallst.com/economy/2020/08/25/big-drop-in-consumer-confidence-makes-sp-500-all-time-high-hard-to-justify/

 

    News on Stocks in Our Portfolios

 

 

 

What I am reading today

 

            Five investment decisions that matter.

            https://www.servowealth.com/blog/the-five-investment-decisions-that-really-matter

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Wednesday, August 26, 2020

The Morning Call--The highest P/E ratio in 18 years

 

The Morning Call

 

8/26/20

 

The Market

         

    Technical

               

The Averages  (28284, 3443) turned in a mixed day (Dow down, S&P up), though the Dow’s performance was likely impacted by the negative price action among those components that will be dropped in the coming re-set.  Still there remain a number of negatives (1) volume was weak, (2) on Monday, both of the indices made a gap up open, joining those two gap up opens made three weeks ago, (3) the VIX continues to reflect investor concern and (4) breadth remains in overbought territory. Nonetheless, I am sticking with my assumption that the Market’s bias remains to the upside long term.

 

Gold was up slightly, remaining in the uptrend off its June low.  TLT dropped ¾% on a gap down open, ending back below its 100 DMA (now resistance) and negating the challenge starting last Friday.  The dollar was down, having just made a lower high.   

               

            Tuesday in the charts.

            https://www.zerohedge.com/markets/nasdaq-hits-new-record-high-confidence-crashes-6-year-lows

 

    Fundamental

 

       Headlines

 

              The Economy

 

                        US

 

Weekly mortgage applications fell 6.5% while purchase applications were up 0.4%.

 

The June Case Shiller home price index was up 0.2% versus estimates of +0.3%.

https://www.advisorperspectives.com/dshort/updates/2020/08/25/s-p-case-shiller-home-price-index-june-update

 

July new home sales soared 13.9% versus expectations of up 1.3%.

https://www.advisorperspectives.com/dshort/updates/2020/08/25/new-home-sales-up-13-9-in-july-beats-forecast

 

July durable goods orders  were up 11.2% versus an anticipated increase of 4.3%; ex transportation, they were up 2.4% versus 2.0%.

https://www.zerohedge.com/economics/us-durable-goods-orders-smash-expectations-july-thanks-war

 

August consumer confidence came in at 84.8 versus consensus of 93.0.

https://www.advisorperspectives.com/dshort/updates/2020/08/25/consumer-confidence-down-for-second-consecutive-month

 

The August Richmond Fed manufacturing index was 18 versus forecasts of 1.

                          https://www.advisorperspectives.com/dshort/updates/2020/08/25/richmond-fed-manufacturing-strengthened-in-july

 

                        International

 

Q2 German GDP fell 9.7% versus projections of 10.1%; the August business climate index was reported at 92.6 versus 92.2.

 

June Japanese leading economic indicators came in at 84.4 versus estimates of 85.0.

 

                        Other

 

                          Did the US recession end in July?

                          http://www.capitalspectator.com/did-the-us-recession-end-in-july/

 

                          A double dip in small business re-openings.

                          https://www.zerohedge.com/markets/chart-day-number-small-businesses-open-reverses

 

            The coronavirus

 

              ***overnight update.

              https://www.zerohedge.com/geopolitical/france-imposes-new-covid-19-restrictions-marseilles-delhi-outbreak-intensifies-live

 

              UK scientist says lockdown was monumental mistake.

              https://www.zerohedge.com/political/uk-govt-scientist-admits-lockdown-was-monumental-mistake-global-scale

 

                  GOP senators demand FDA explain hydroxychloroquine stance.

              https://www.zerohedge.com/political/gop-senators-demand-fda-explain-hydroxychloroquine-stance-amid-positive-studies-and

               

            The Fed

 

More speculation on Powell’s message (potential policy revisions) from the upcoming Jackson Hole conference.

https://www.zerohedge.com/markets/if-powell-announces-average-inflation-targeting-thursday-rates-will-be-hold-42-years

 

            Bottom line.  The highest P/E ratio in 18 years.

              http://www.crossingwallstreet.com/archives/2020/08/the-highest-p-e-ratio-in-18-years.html

 

    News on Stocks in Our Portfolios

 

 

 

What I am reading today

 

            Greenland’s melting ice sheet is nothing to worry about.

            https://issuesinsights.com/2020/08/24/greenlands-melting-ice-sheet-nothing-to-worry-about/

 

            Is it capital income or labor income?

            https://www.adamsmith.org/blog/is-it-capital-income-or-labour-income

 

Visit Investing for Survival’s website (http://investingforsurvival.com/home) to learn more about our Investment Strategy, Prices Disciplines and Subscriber Service.