Wednesday, September 2, 2020

The Morning Call---When the irrational becomes rationalized

The Morning Call




The Market




The Averages  (28646, 3526) rebounded nicely yesterday, maintaining their upward momentum.  As you know, my assumption is that the Market’s bias is to the upside long term.   However, shorter term, a number of factors are at work that could lead to some price weakness: (1) last week, both of the indices made a gap up open, joining those two gap up opens made four weeks ago, (2) the VIX continues to reflect investor concern [yesterday, it was down only fractionally on what was strong Market day], (3) the indices’ breadth remains in overbought territory while the rest of the Market weakens and (4) historically, September is the worst month of the year for Market performance.


            Art Cashin on the short term effects of stock splits.



            Robinhood traders are not having that much impact on stock prices.



Gold continued to move up, maintaining the uptrend off its March/June lows.  TLT rallied another 1 1/8%; but it was still not enough to undo the damage done in last week’s selloff.  Short term, its chart remains negative.  The dollar rose, but its chart remains the ugliest of those indicators that I follow. 


            Tuesday in the charts.







              The Economy




Weekly mortgage applications declined 2% while purchase applications     were off 0.2%.


                          Month to date retail chain store sales grew faster than in the prior week.


                          July construction spending rose 0.1% versus estimates of +1.0%.



                          The August manufacturing PMI was 53.1 versus consensus of 53.6.



                           The August ISM manufacturing index was 56.0 versus expectations of                54.5.



August light vehicle sales came in at 15.1 million versus forecasts of 14.5



The August ADP private payroll report showed job increases of 425,000 versus projections of 950,000.





                          July German retail sales fell 0.9% versus projections of +0.5%.


                          July EU PPI was +0.6% versus estimates of +0.5%.




                          July update on median household income.



                                                  Framing lumber prices continue to soar.




The Fed


  The true costs of zombie companies and easy money.


The coronavirus


  How deep is your coronavirus religion?


              Millions of Americans have had their savings wiped out.





              US increases support for Taiwan.



              US/China decoupling is hard to do---this article seems a bit too optimistic.



            Bottom line  When the irrational becomes rationalized.



              The latest from Mohamed El Erian.



    News on Stocks in Our Portfolios


Brown-Forman (NYSE:BF.B): Q1 GAAP EPS of $0.67 beats by $0.37.

Revenue of $753M (-1.7% Y/Y) beats by $61.72M.


What I am reading today



            Lucifer’s hammer.



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