Friday, September 4, 2020

The Morning Call--Blame the Fed


The Morning Call




The Market




The Averages  (28292, 3455) were hammered yesterday on higher volume and very negative breadth.  In the last couple of weeks, I have been pointing to a number factors suggesting that some sort of correction was in the offing: (1) a series of four gap opens over the last month.  Yesterday’s pin action took care of the most recent gap.  Three to go, (2) the VIX was broadly anticipating yesterday’s carnage, (3) despite the weakness in breadth, it remains in overbought territory and (4) historically, September is the worst month of the year for Market performance.


The question is clearly follow through.  Short term, the aforementioned technical factors could weigh on prices.  But that would be technically healthy.  This Market needs a rest.   On the other hand, as you know, my operating assumption has been that the Market’s bias is to the upside long term.  At the moment, there is no reason to doubt that.  Both indices are above their DMA’s and, except for the Dow’s short term trading range, are in uptrends across all timeframes.


That is not to say that the fundamental day of reckoning, which I also have been predicting, is upon us.  But that remains to be seen.  The good news is that if it is, my cash position will hold me in good stead.



BofA’s ‘must know’ Market stats.



Gold was off again, finishing below the uptrend off its March/June lows for a second day (though it did set a gap down open on Wednesday).  In addition, it has now made a second lower high---so we have a second short term negative.  The key is follow through.  TLT rose again, ending above the uptrend off its March/June low for a second day and above its 100 DMA (now resistance; if it remains there through the close on Monday, it will revert to support).  Clearly, a plus.  The dollar was up fractionally, but its chart remains the ugliest of those indicators that I follow. 



                        Thursday in the charts.







              The Economy




The August services PMI came in at 55.0 versus estimates of 54.8; the composite PMI was 54.6 versus 54.7.



The August ISM nonmanufacturing index was reported at 56.9 versus consensus of 57.0.



August nonfarm payrolls rose 1,371,000 versus expectations of 1,400,000;     

the unemployment rate was 8.4% versus 9.8%.





July German factory orders were up 2.8% versus forecasts of +5.0%; the August construction PMI was 48 versus 49.1.


The August UK construction PMI was 54.6 versus projections of 58.5.




                          The global coronavirus economy.



            The Fed


              The Fed abandons the Phillips Curve.



              Paul Volker turning in his grave (must read).





              China will sell 20% of its US Treasury holdings.



            Bottom line  Thank the Fed.



              August dividends by the numbers.



              The ‘other-side’ argument.



                  The coronavirus price compression.



    News on Stocks in Our Portfolios




What I am reading today


The future is coming.



Visit Investing for Survival’s website ( to learn more about our Investment Strategy, Prices Disciplines and Subscriber Service.




No comments:

Post a Comment