The Morning Call
9/14/20
The
Market
Technical
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.
Fundamental
Headlines
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.
US
The August budget
deficit was $200 billion versus estimates of $265 billion.
International
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%.
Other
More Q3 GDP forecasts.
https://www.calculatedriskblog.com/2020/09/q3-gdp-forecasts_11.html
The US economy is having a Wyle E. Coyote
moment.
https://www.ft.com/content/0850c689-2615-4128-85ed-9a89f5c0a82a
Yield spreads and inflation.
http://scottgrannis.blogspot.com/2020/09/spread-monitor-looking-good.html
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.
https://www.nytimes.com/2020/09/11/upshot/pandemic-decline-preventive-care.html
Bottom
line The ingredients for another mean reverting event.
https://www.zerohedge.com/markets/5-ingredients-another-market-event-remain
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