The Morning Call
8/24/20
The
Market
Technical
Clearly, the
S&P is at an important junction---testing its all-time high. It is not that it has paused right below that
level to gather strength for a challenge---that is to be expected. The issue is, will it push higher or create a
double top. My assumption is the
former. But this would be the point where
technical factors could act to halt the current the rise to ever higher
overvaluations.
Breadth stinks.
https://www.zerohedge.com/markets/horrendous-market-breadth-stinks-high-heaven-screams-imminent-risk
S&P short
interest hits lowest on record.
https://www.zerohedge.com/markets/bears-capitulate-sp-short-interest-hits-lowest-record
The long bond
spent the week trying to recover from the prior week’s hammering, at which it
was barely successful. The good news is
that it is now challenging its 100 DMA, which just recently reverted to
resistance. If it remains there through the
close on Tuesday, it will revert back to support.
Gold had a mixed
week. Early on, it closed that big gap
down open; but then immediately sold off.
Still it held above the uptrend off its June low; and as long as it does,
then technically speaking, all systems are go.
The dollar rallied
last week. However, until it can at
least make a higher high/higher low, the trend is firmly down.
The VIX continues
to mirror stocks directionally but not in order of magnitude. You can see that it remains well above its
February low where the S&P is right on its February high and the Dow is
close.
In sum, all the indices
are hinting of a possible directional change.
But nothing solid. That suggests
a fundamental shift from an easy money, low interest rate/low inflation environment
to one with higher rates/higher inflation.
Friday in the
charts.
Fundamental
Headlines
The
Economy
Review of last week
The data (and
primary indicators) last week was upbeat yet again. Reintroducing the prospect of ‘V’ recovery,
or at least something close. I am not
there yet; but the recent improvement in the numbers cannot be ignored. On the other hand, the international stats
remained negative which can’t be a plus for us.
Longer 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
The July Chicago Fed national activity index
came in at 1.18 versus of
2.73.
International
Other
Three truths that will define the
future economy.
https://www.zerohedge.com/economics/mauldin-3-truths-will-define-3-part-economy
The first half of a W looks like a V.
https://www.zerohedge.com/markets/broyhill-warns-first-half-w-looks-lot-v
The risk of a hard consumer landing.
https://www.zerohedge.com/markets/taking-away-punch-bowl-risk-hard-landing-consumer-spending
Global bankruptcies
soar.
Morgan Stanley projects higher inflation.
News on Stocks in Our Portfolios
Medtronic (NYSE:MDT) declares $0.58/share
quarterly dividend, in line with previous.
What
I am reading today
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