Thursday, August 6, 2020

The Morning Call--Even with a vaccine, some damage is irreversible

The Morning Call

 

8/6/20

 

The Market

         

    Technical

 

The Averages  (27201, 3327) were up again and made some progress in resolving the friction between them, to wit, the Dow finally made a new high.  On the other hand, it still hasn’t surpassed its June high.  In addition, both of the indices made another gap up open---to go with the one they made Monday.  Further, the VIX continues to under react to the recent stock price surge; it was off only 3 ¼% yesterday---though it did close slightly below its June low.  All in all, this pin action is not indicative of a solid trending Market, just a strong S&P.  Nonetheless, I am sticking with my assumption that the Market’s bias remains to the upside.

 

For the optimists.  A bit too so, for me.

https://thereformedbroker.com/2020/08/05/its-directional/

 

Concentration in the stock market.

https://awealthofcommonsense.com/2020/08/concentrated-in-the-stock-market/

           

Gold was up another 1%, finishing above the upper boundary of its long term trading range for a second day (if it remains there through the close on Friday, it will reset to an uptrend). 

https://global-macro-monitor.com/2020/08/04/gold-heading-to-3000/

 

The long bond reversed itself again, putting it back below the uptrend off its June low.  In addition, it bounced off its March and April high closes.  So, it seems to be at a significant test level.  Follow through.

 

The dollar fell another 1/2 %, ending back below the lower boundary of its short term downtrend.  UUP and GLD continue to point to a weak economy but TLT could potentially call that scenario into question.

 

            Wednesday in the charts.

            https://www.zerohedge.com/markets/gold-nasdaq-soar-sp-just-shy-all-time-high-mad-dollar-destruction-dash

 

    Fundamental

 

       Headlines

 

              The Economy

 

                        US

Weekly jobless claims came is at 1,186,000 versus expectations of         1,415,000.

 

The July services PMI was 50.0 versus forecasts of 49.6; the composite PMI was 50.3 versus 50.0.

https://www.advisorperspectives.com/dshort/updates/2020/08/05/markit-services-pmi-business-activity-stabilizes-but-demand-conditions-deteriorate

 

The July ISM nonmanufacturing index was 67.2 versus consensus of 60.0.

                          https://www.advisorperspectives.com/dshort/updates/2020/08/05/ism-non-manufacturing-continued-growth-in-july

 

                        International

                       

The July EU construction PMI was reported at 48.9 versus projections of 52.0; the German construction PMI was 47.1 versus 50.4; the UK construction PMI was 58.1 versus 57.0.

 

                        Other

 

                          June median household income.

                          https://politicalcalculations.blogspot.com/2020/08/median-household-income-in-june-2020.html#.Xyr5xyhKiM8

 

                          How detrimental is inflation?

                          https://www.aier.org/article/who-bears-the-burden-of-dollars-falling-purchasing-power/

 

More on the Trump/Microsoft/TikTok deal.  I agree with the author regarding Trump’s high handed maneuver; but it is a false narrative, in my opinion, to downplay the threat of the militant side of the woke momentum.

                          https://www.epsilontheory.com/the-mountain-and-the-molehill/

 

            The coronavirus

 

              ***overnight update.

              https://www.zerohedge.com/geopolitical/germany-suffers-biggest-jump-covid-19-case-may-poland-imposes-new-restrictions-live

 

              Job losses mount.

              https://www.bloomberg.com/news/articles/2020-08-05/u-s-job-losses-set-to-mount-with-small-firms-running-on-fumes?srnd=premium&sref=loFkkPMQ

 

                          More bailout money won’t stop credit card defaults.

              https://www.bloomberg.com/news/articles/2020-08-05/more-bailout-cash-may-just-delay-wave-of-credit-card-defaults?srnd=premium&sref=loFkkPMQ

 

                       

                        The Fed

 

              The difference between good and bad economics.

               https://www.zerohedge.com/markets/difference-between-good-economics-and-bad

                    

            China

 

              Could China close the Straits of Hormuz?

              https://www.zerohedge.com/geopolitical/china-will-soon-be-able-close-straits-hormuz-and-red-sea

 

            Bottom line.  There is nothing in the economic data, the paths of fiscal and monetary policies or the end game of the coronavirus that suggests to me that the S&P should be a short hair away from its all-time high.  I think that the cross currents in the major technical indices reflect that sentiment.  I love my gold and cash.  Fortunately, QE is helping gold as cash drags on performance.  

 

            https://www.zerohedge.com/markets/let-me-tell-you-terrifying-story

            The latest from Howard Marks.

            https://www.advisorperspectives.com/commentaries/2020/08/05/time-for-thinking

 

    News on Stocks in Our Portfolios

 

General Dynamics (NYSE:GD) declares $1.10/share quarterly dividend, in line with previous.

 

Becton, Dickinson (NYSE:BDX): Q3 Non-GAAP EPS of $2.20 beats by $0.13; GAAP EPS of $0.97 beats by $0.04.

Revenue of $3.86B (-11.3% Y/Y) misses by $100M.

 

What I am reading today

 

            New report shows Americans are paying less for drugs.

            https://www.aei.org/health-care/new-report-shows-a-majority-of-people-pay-less-for-medicines-than-before/

 

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