Wednesday, August 5, 2020

The Morning Call--Gold breaking out

The Morning Call

 

8/5/20

 

The Market

         

    Technical

 

The Averages  (26828, 3306) had a good day but didn’t resolve the friction between them.  While they are not out of sync with respect to a major trend, (1) the S&P is above its June high, the Dow is not, (2) the Dow unsuccessfully challenged its 200 DMA [now support] intraday, the S&P is not even close and (3) while both are making higher lows, the S&P is making higher highs; the Dow is not.  Adding to the negative tilt, both indices made gap up opens on Monday.  Plus, the VIX, while off slightly yesterday, remains above its June low. In short, it appears that we are in for more backing and filling.  Nonetheless, I am sticking with my assumption that the Market’s bias remains to the upside.

           

Gold soared 2%, finishing above the upper boundary of its long term trading range (if it remains there through the close on Friday, it will reset to an uptrend.  The long bond recovered Monday’s losses (up 1%) and then some, putting back in an uptrend off its June low.  The dollar fell 3/8%, ending back near the lower boundary of its short term downtrend.  These indicators are back pointing in unison to a weaker economy.

            https://www.marketwatch.com/story/heres-the-best-way-to-hedge-the-weakening-us-dollar-and-buying-gold-isnt-the-move-2020-07-28?mod=home-page

 

            King Dollar?

            https://www.zerohedge.com/markets/tick-tock-staying-thrones-means-battle-come-point

 

            Tuesday in the charts.

            https://www.zerohedge.com/markets/bonds-bullion-bid-new-records-stocks-stall-stimulus-scares

 

    Fundamental

 

       Headlines

 

              The Economy

 

                        US

 

Month to date retail chain store sales grew at the same rate as in the prior week.

 

June factory orders were up 6.2% versus estimates of up 5.0%; ex transportation, they were up 4.4% versus 4.2%.

 

Weekly mortgage applications fell 5.1% while purchase applications were down 1.8%.

 

The July ADP private payroll report showed job increases of 167,000 versus forecasts of 1,500,000.  However, the June number was revised up by almost 2,000,000.

https://www.zerohedge.com/markets/adp-employment-huge-miss-just-167k-jobs-added-12-expected-after-massive-upward-revision

 

The June trade balance was -$50.7 billion versus an anticipated -$50.1 billion.

 

                        International

 

June EU retail sales were up 5.7% versus consensus of up 5.9%; the July services PMI came in at 54.7 versus 55.1; the composite PMI was 54.9 versus 54.8.

 

The July German services PMI was 55.6 versus expectations of 56.9; the composite PMI was 55.3 versus 55.5.

 

The July Chinese Caixin services PMI was 54.1 versus projections of 56.0; the composite PMI was 54.5 versus 55.0.

 

The UK services PMI was 56.5 versus predictions of 56.6; the composite PMI was 57.0 versus 57.1.

 

                        Other

 

                          The benefits of creative destruction.

                          https://www.aei.org/economics/5-questions-for-arthur-diamond-on-economic-growth-and-innovative-dynamism/

 

                          Really?  He is trying to stick up Microsoft?

                          http://coyoteblog.com/coyote_blog/2020/08/trump-attempting-to-establish-the-worst-regulatory-rule-ever.html

                       

                          Business cycle indicators as of 8/3.

                          http://econbrowser.com/archives/2020/08/business-cycle-indicators-august-3-2020

 

                                  Vehicle sales per capita.

                          https://www.advisorperspectives.com/dshort/updates/2020/08/04/vehicle-sales-per-capita-as-of-july-2020

 

                                  Framing lumber prices up 81% YoY.

                          https://www.calculatedriskblog.com/2020/08/update-framing-lumber-prices-up-81-year.html

 

                The coronavirus

 

              ***overnight update.

              https://www.zerohedge.com/geopolitical/global-covid-19-deaths-top-700000-victoria-suffers-another-record-despite-toughest

 

              A positive thought amidst all the pessimism.

              https://howardlindzon.com/disruption-is-good-nasdaq-20000-the-seeds-are-being-planted-at-an-accelerating-pace/

 

More evidence of the gross mismanagement of this crisis.  The misinformation about hydroxychloroquine (must read).

              https://www.zerohedge.com/political/veteran-virologist-slams-mainstream-medias-misinformation-about-effective-covid-treatment

 

 

            Bottom line.  Update on valuations.

            https://www.advisorperspectives.com/dshort/updates/2020/08/04/market-cap-to-gdp-an-updated-look-at-the-buffett-valuation-indicator

            https://www.advisorperspectives.com/dshort/updates/2020/08/04/the-q-ratio-and-market-valuation-july-update

                https://www.advisorperspectives.com/dshort/updates/2020/08/04/is-the-stock-market-cheap

 

              July dividends by the numbers.

              https://politicalcalculations.blogspot.com/2020/08/dividends-by-numbers-in-july-2020.html#.XymnBihKiM8

 

 

    News on Stocks in Our Portfolios

 

Emerson Electric (NYSE:EMR) declares $0.50/share quarterly dividend, in line with previous.

 

What I am reading today

 

            Nanny state now targeting alcohol consumption.

            https://dailycaller.com/2020/08/03/barr-nanny-state-now-targets-even-moderate-alcohol-consumption/

 

            Mystery signals from Milky Way.

            https://nypost.com/2020/08/03/mystery-radio-signal-sent-to-earth-from-closest-ever-point-within-milky-way/

 

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