Thursday, September 3, 2020

The Morning Call--Yikes


The Morning Call




The Market




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.







              The Economy




                          Weekly jobless claims rose 881,000 versus consensus of 950,000.


                          A dose of reality about the labor market (must read):




                          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.





                          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.




                            An update from my favorite optimist, who isn’t so optimistic.



                            The ‘K’ recovery is alive and well and happening.



                            Update on business cycle indicators.



                            August heavy duty truck sales down 26% YoY in August.



            The coronavirus


              The coronavirus is no real threat to kids.



              Why lockdowns are counterproductive.



                   Fiscal Policy


             CBO projects US debt to hit record high.



            Bottom line  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.



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