Monday, September 14, 2020


The Morning Call




The Market




            Intermediate and long term, the S&P remains in uptrends.  Plus, it is above both DMA’s.  On the other hand, last week, it reset its short term uptrend to a trading range and has made a lower high.  Despite this bit of cognitive dissonance, I continue to believe that the Market’s bias is to the upside until investors cease to believe in the magic of QE.  In the meantime, support exists at its 100 DMA (3159), its 200 DMA (3097) and the lower boundary of its newly reset short term trading range (2991).


            Long term, TLT is in uptrends across all timeframes and is above its 200 DMA.  It is currently see sawing above and below its 100 DMA---so this seems to be the battle line.  At the moment, I have to assume that momentum is to the upside (lower interest rates); but with all the talk of inflation, I wonder if we aren’t witnessing a trend reversal.  Stay tuned.


            The good news is that GLD (1) long term is  above both DMA’s and in uptrends across all timeframes and (2) short term has held above the minor August/September support level.  The bad news is that short term, it (1) has made three lower highs and (2) was unable to hold above its all time high [the horizontal black line near the top of the chart].  So, short term, it appears to be in a consolidation phase while being in a very strong long term uptrend.  I am watching the minor support level and the trend of lower highs for directional information.


            Intermediate term, the dollar is in a rising trend, though admittedly, it is has been quite volatile.  Shorter term, it has been hammered. It does appear to be building support near the lower boundary of that intermediate term uptrend; but it has some work to do to brighten an otherwise ugly chart. 


               Short term, the VIX is trendless.  However, it seems to have found support at its August lows.  But that is not enough to provide much insight into the direction of equities. 







              The Economy


                        Last Week in Review


The stats last week were slightly negative with no primary indicators reported.  So, there really was not enough directional information to warrant additional comment on the course of the US economy.  Except to say that there was nothing to alter the view that the economy is in an improving trend. Overseas, the indicators were slightly positive; but again, there wasn’t enough to counter the notion that the rest of the world is having a tougher time recovering than the US.  I think that unfortunately their sluggish performance will serve to restrain our own growth.


             In other news, the ECB left rates and QE unchanged.  So, the beat goes on.


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.




The August budget deficit was $200 billion versus estimates of $265 billion.                                         





July Japanese industrial production rose 8.7% versus expectations of +8.0%; capacity utilization increased by 9.6% versus +5.0%.


July EU industrial production increased 4.1% versus forecasts of 4.0%.




                          More Q3 GDP forecasts.



                                  The US economy is having a Wyle E. Coyote moment.



                                  Yield spreads and inflation.




            The Fed. 


              The risk of the Fed aiding fiscal policy.



            Fiscal Policy


              Today’s bloated US debt will lead to higher unemployment.



            The coronavirus


               Using a hammer to kill a fly.



               Preventive care plummets.



            Bottom line  The ingredients for another mean reverting event.




    News on Stocks in Our Portfolios



What I am reading today



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