The Morning Call
9/3/20
The
Market
Technical
The Averages (29100, 3580) had a gangbusters day on higher
volume and even stronger breadth. Clearly
supporting my assumption 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) yesterday, the
indices gap up opened, adding yet another gap up open to the one that occurred
last week and those two gap up opens made four weeks ago, (2) the VIX continues
to reflect investor concern [yesterday, it was again up on a 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.
This is a little
wonky but it explains what is causing this Market melt up---and it is not simply
more buyers than sellers.
Gold sold off, finishing
below the uptrend off its March/June lows (again); though it did so on a gap
down open. Still, that move is a short
term negative. The key is follow through.
TLT rallied yet another 1%, ending back
above the uptrend off its March/June low and right on its 100 DMA (now
resistance). Clearly, a plus. The dollar rose, but its chart remains the ugliest
of those indicators that I follow.
Wednesday in the charts.
Fundamental
Headlines
The
Economy
US
Weekly jobless claims rose 881,000 versus
consensus of 950,000.
A dose of reality about the labor market (must
read):
https://www.zerohedge.com/markets/dose-reality-about-labor-market
July factory orders rose 6.4% versus
expectations of +6.0%; ex transportation, they were up 2.1% versus up
4.5%.
Q2 nonfarm
productivity was up 10.1% versus estimates of +7.5%; unit labor costs were up 9.0% versus +12.1%
The Fed released
its latest Beige Book which pointed to modestly improving economic conditions,
a mixed labor market and upward pressure on prices.
International
July EU retail sales declined 1.3% versus
projections of +1.5%.
The August
Japanese services PMI came in at 45, in line; the Chinese services PMI was 54
versus 53.7; the German services PMI was 52.5 versus 50.8; the EU services PMI
was 50.5 versus 50.1 the UK services PMI was 58.8 versus 60.1.
The August
Japanese composite PMI was 45.2 versus forecasts of 44.9; the Chinese composite
PMI was 55.1 versus 54.0; the German composite PMI was 54.4 versus 53.7; the EU
composite PMI was 51.9 versus 51.6; the UK composite PMI was 59.1 versus 60.3.
Other
An update from my
favorite optimist, who isn’t so optimistic.
http://scottgrannis.blogspot.com/2020/08/the-virus-elections-and-fed.html
The ‘K’ recovery
is alive and well and happening.
Update on business
cycle indicators.
http://econbrowser.com/archives/2020/09/business-cycle-indicators-september-1st
August heavy duty
truck sales down 26% YoY in August.
https://www.calculatedriskblog.com/2020/09/us-heavy-truck-sales-down-26-year-over.html
The
coronavirus
The coronavirus is no real threat to kids.
https://nypost.com/2020/09/01/the-numbers-are-clear-covid-is-no-real-threat-to-kids/
Why
lockdowns are counterproductive.
Fiscal Policy
CBO projects US debt to
hit record high.
Bottom line
Yikes.
https://www.advisorperspectives.com/commentaries/2020/09/02/yikes
Update
on valuations.
More---S&P
hits all time high P/E.
News on Stocks in Our Portfolios
Donaldson (NYSE:DCI): Q4
GAAP EPS of $0.50 beats by $0.06.
Revenue
of $617.4M (-15.1% Y/Y) beats by $6.74M.
What
I am reading today
Studying the creativity
and intelligence of the octopus.
https://www.cbsnews.com/news/studying-the-creativity-and-intelligence-of-the-octopus-8-30-2020/
Visit Investing
for Survival’s website (http://investingforsurvival.com/home)
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