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

 

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