The Morning Call--Be sure that your greed is under control

The Morning Call

 

12/16/20

 

The Market

         

    Technical

 

            Tuesday in the charts.

            https://www.zerohedge.com/markets/stocks-soar-stimulus-hope-smart-money-dollar-puke

 

            The latest Fund Manager Survey.

            https://www.zerohedge.com/markets/record-wall-street-euphoria-triggers-first-bofa-sell-signal-february-2020

 

    Fundamental

 

       Headlines

 

              The Economy

 

                        US

                           

Weekly mortgage applications rose 1.1% while purchase applications were up 1.8%.

 

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

 

November industrial production rose 0.4% versus forecasts of up 0.3%; capacity utilization was 73.3% versus 72.9%.

                            https://www.advisorperspectives.com/dshort/updates/2020/12/15/the-big-four-industrial-production-increase-in-november

                                                       

November retail sales fell 1.1% versus projections of -0.3%; ex autos, they were down 0.9% versus +0.1%.

                                     https://www.zerohedge.com/personal-finance/us-retail-sales-disappoint-tumble-most-april

 

                        International

 

The October EU trade balance was E30.0 billion versus expectations of E28.0 billion; construction output fell 1.4% versus +0.8%; the December flash manufacturing PMI was 55.5 versus 53.0; the services PMI was 47.3 versus 41.0; the composite PMI was 49.8 versus 45.8.

 

The November Japanese trade balance was Y366.8 billion versus predictions of Y529.0 billion; the December flash manufacturing PMI was 49.7 versus 50.0; the services PMI was 47.2 versus 48.5; the composite PMI was 48.0 versus 49.0.

 

November UK CPI was -0.1% versus estimates of +0.1%; PPI was 0 versus +0.4%; the December flash manufacturing PMI was 57.3 versus 55.0; the services PMI was 49.9 versus 50.5; the composite PMI was 50.7 versus 51.0.

 

The November German flash manufacturing PMI was 58.6 versus consensus of 56.4; the service PMI was 52.5 versus 50.4; the composite PMI was 52.5 versus 50.4

 

                        Other

                        

 We are richer than ever.  So says my favorite optimist.  But it is only because financial asset prices are inflated.  As proof, I offer you chart #7 in this piece.  Notice that the S&P is almost touching the upper boundary of its long term uptrend.  Notice also what historically has happened after following such an occurrence.

                           http://scottgrannis.blogspot.com/2020/12/were-richer-than-ever.html

 

                          The only fair trade is free trade.

                              https://www.adamsmith.org/blog/just-to-remind-the-only-fair-trade-is-free-trade

 

                          Spending breakdown of US households.

                          https://politicalcalculations.blogspot.com/2020/12/the-consumer-spending-of-american.html#.X9kLrNhKiM8

 

                          Global oil refining crisis will worsen this winter.

                          https://www.zerohedge.com/technology/global-oil-refinery-crisis-will-worsen-winter

 

            Central Banks

 

              The ECB’s latest mistake.

              https://www.zerohedge.com/economics/ecbs-latest-big-mistake

 

            The coronavirus

 

              This is a must read analysis of the Pfizer vaccine study.

              https://www.nakedcapitalism.com/2020/12/an-internal-medicine-doctor-and-his-peers-read-the-pfizer-vaccine-study-and-see-red-flags.html

 

            China

 

              Trade with China roars.

              https://www.nytimes.com/2020/12/14/business/economy/us-china-trade-covid.html

 

              Bank of China makes record liquidity injection.

              https://www.zerohedge.com/markets/china-injects-record-950-billion-yuan-medium-term-liquidity-after-bond-defaults

 

            Bottom line.  Be sure you have your greed under control.

                        https://theirrelevantinvestor.com/2020/12/15/the-most-powerful-motivator/

 

    News on Stocks in Our Portfolios

 

Franklin Resources (NYSE:BEN) declares $0.28/share quarterly dividend, 3.7% increase from prior dividend of $0.27.

Goldman upgrades Exxon.

Exxon upgraded at Goldman in second Buy rating this week (NYSE:XOM) | Seeking Alpha

 

What I am reading today

 

           

 

Visit Investing for Survival’s website (http://investingforsurvival.com/home) to learn more about our Investment Strategy, Prices Disciplines and Subscriber Service.

 

 

 

Monday Morning Chartology

 

The Morning Call

 

8/17/20

 

The Market

         

    Technical

 

            The S&P went through some consolidation last week.  The good news, it remained in a very narrow range.  The bad news is that this is occurring at a major resistance level (its all-time high), it has made two small gap up opens that need to be filled and breadth is overbought.  Short term, I think more consolidation is in store; but long term, I think the bias is still to the upside.

 

            The long bond did a lot more than just consolidate last week.  It fell out of the uptrend off its June low.  And it traded below its 100 DMA (now support; if it remains there through the close today, it will revert to resistance).  On the other hand, it finished within uptrends across all timeframes.  Clearly, a successful challenge of its 100 DMA would raise the question of a potential change in trend.  It is too soon to make that call; but it has now become a possibility.

 

            Gold also had a tough week.  However, it (1) remains above both DMA’s and in uptrends across all timeframes and (2) you can see a major gap down open that needs to be filled.  The trend remains up.

 

            Buffett buys Barrick Gold.

            https://www.zerohedge.com/markets/did-buffett-just-bet-against-us-berkshire-buys-barrick-gold-dumps-goldman

 

            The dollar remains in an easily identifiable (short term) downtrend.  You can see the lower boundary (purple line) of its intermediate term at the bottom of the chart.  So. it is not that far from challenging another major uptrend.  In addition, it is below both DMA’s.  My assumption is that the dollar is going lower.  On the other hand:

 

            ‘Dollar short’ is now the consensus trade.

            https://www.zerohedge.com/markets/short-dollar-now-worlds-most-consensus-trade-so-its-time-go-long

 

            The VIX is a mirror image of the S&P---as it should be.  But surprisingly of late, this measure of volatility (investor uncertainty) has not been as volatile to the downside  (doesn’t reflect the extent of investor uncertainty) as the price movement in the S&P would suggest. 

 

            VIX at 46? (must read).

            https://www.zerohedge.com/markets/vix-46-part-2

 

            Friday in the charts.

            https://www.zerohedge.com/markets/gold-slips-most-march-stocks-see-best-100-day-run-ever

 

    Fundamental

 

       Headlines

 

              The Economy

 

                        Review of last week

 

The data (and primary indicators) last week was upbeat again.  Overseas the stats turned positive.  That is good news given the recent sluggishness in both sets of numbers.  The one concerning datapoint that bears mentioning is the marked uptick in inflation both here and abroad.  Of course, one month’s readings don’t make a trend.  Nonetheless, if these stats portend the long awaited rise in inflation, then the long term trends in equities, bonds, gold and the dollar are about change.

 

Short term, the economic recovery continues though its somewhat erratic nature leaves its shape (V, U, W, L or a swoosh) in question.

 

Longer 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 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.

 

                        Low interest rates are not stimulus (must read):

                      https://www.realclearmarkets.com/articles/2020/08/14/low_rates_arent_a_central_bank_providing_accommodation_547435.html

 

                        So, what are higher rates?

                        https://www.zerohedge.com/markets/chart-day-china-about-unleash-inflationary-tsunami-us

 

                        US

 

The August housing market index was reported at 78 versus consensus of 73.

https://www.zerohedge.com/markets/homebuilders-have-never-ever-been-more-confident

 

The August NY Fed manufacturing index came in at 3.7 versus expectations of 15.

                          https://www.zerohedge.com/political/v-over-empire-manufacturing-survey-slumps-august-new-orders-decline

 

                        International

 

June Japanese industrial production was up 1.9% versus estimates of up 2.7%.

 

                        Other

 

                          Transpacific shipping rates soaring.

                          https://www.zerohedge.com/markets/trans-pacific-going-crazy-demand-defies-pandemic-pessimists

 

                          Bankruptcies at ten year high.

                          https://www.zerohedge.com/personal-finance/us-bankruptcies-are-already-10-year-high-pandemic-takes-its-toll

                         

            The coronavirus

 

              ***overnight update

              https://www.zerohedge.com/geopolitical/italy-closes-nightclubs-covid-19-revival-rocks-europe-us-deaths-top-1k-5th-day-live

 

              More evidence that hydroxychloroquine works.

              https://www.zerohedge.com/medical/yale-prof-hydroxychloroquine-haters-spewing-misleading-and-toxic-disinformation

 

            Central Banks

 

              The ECB is the wrong model.

              https://www.zerohedge.com/bailout/massive-stimulus-does-not-prevent-eurozone-slowdown

 

            China

 

              Scheduled review of US/China phase one trade deal postponed.

              https://www.zerohedge.com/markets/review-us-china-trade-deal-planned-tomorrow-delayed-indefinitely-there-nothing-review

 

              US hammers Huawei with new restrictions.

              https://www.zerohedge.com/geopolitical/white-house-hammers-huawei-more-restrictions-using-american-chip-technology

 

            Bottom line.  Whatever the timing of a vaccine, however receptive the population is to inoculation, however fully the economy returns to pre-coronavirus levels, the economy will still be stuck with trillions of new government debt that has to be financed and a Fed which almost surely will slow the rate of expansion of its balance sheet if not reverse it.  And, in the absence of a meaningful decline in equity prices, the Market will have to reconcile the current excesses in valuation with impact of slowing secular economic growth, a global financial system saturated with liquidity and their effects on earnings growth and inflation.

           

            There is no margin of safety in the pricing of stocks today.

            https://www.zerohedge.com/markets/reasons-not-be-cheerful-gmos-montier-certainty-absurdity-fallacious-narratives

 

            In an ‘everything rally’ there is no place to hide.

            https://www.zerohedge.com/markets/everything-rally-diversification-new-four-letter-word

 

    News on Stocks in Our Portfolios

 

            FactSet Research Systems (NYSE:FDS) declares $0.77/share quarterly dividend, in line with previous.

 

What I am reading today

 

           

 

Visit Investing for Survival’s website (http://investingforsurvival.com/home) to learn more about our Investment Strategy, Prices Disciplines and Subscriber Service.

 

 

 

The Morning Call--Enjoying the ride

The Morning Call

7/16/20

The Market

         

    Technical

The Averages  (26870, 3226) had another good day, though volume was down (again) and stocks drew nearer to overbought territory.  The Dow finished above its 200 DMA for a second day (now resistance; if it remains there through the close on Friday, it will revert to support).  Until the reversion occurs, the indices will remain out of sync.  But clearly this is a positive development.  It also filled its ‘island top’ gap intraday, though it fell back at the close.  Follow through is the key to judging the importance of this pin action. Bottom line, the indices charts are improving; but the Dow needs a little more fuel to revert its 200 DMA to support and confirm the filling of its ‘island top’.

https://www.advisorperspectives.com/commentaries/2020/07/15/technically-speaking-golden-cross-arrives-are-the-bulls-safe

I am sticking with my assumption that the Market’s bias is to the upside---at least until/unless the Averages revert their DMA’s to resistance.

           

With the other indicators, gold was up, the long bond was down (but maintains strong upside momentum) and the dollar was down.  This collective pin action is consistent with itself and with a weak economic outlook.

            https://www.marketwatch.com/story/why-golds-new-all-time-high-will-have-to-wait-2020-07-14

            Wednesday in the charts.

            https://www.zerohedge.com/markets/sp-stalls-critical-resistance-again-bonds-gold-gain

    Fundamental

       Headlines

            The economy

Yesterday’s data releases were positive: June industrial production, capacity utilization, the July NY Fed manufacturing index and weekly mortgage applications were above expectations while purchase applications declined.

Update on the big four economic indicators.

            https://www.advisorperspectives.com/dshort/updates/2020/07/15/the-big-four-economic-indicators-industrial-production-rose-again-in-june

            In addition, the Fed released its latest Beige Book, whose main headline was that  the economy is improving but has a long way to go to get back to prior levels.

            https://www.calculatedriskblog.com/2020/07/feds-beige-book-economic-activity.html

The Markets are walking a dangerous tightrope.

            https://www.bloomberg.com/news/articles/2020-07-15/markets-walk-dangerous-tightrope-before-u-s-stimulus-expires?sref=loFkkPMQ

                        High inflation and currency devaluation (must read):

            https://ftalphaville.ft.com/2020/07/15/1594818256000/You-say-high-inflation--I-say-show-me-the-currency-devaluation/

            Overseas, the June Japanese trade balance was above estimates but June UK CPI and core CPI were hotter than anticipated.

           

            The coronavirus

            The misreporting of virus deaths.

            https://www.realclearmarkets.com/articles/2020/07/15/carefree_mis-reporting_of_virus_deaths_from_alarmist_media_498986.html

            More details on Moderna’s just released vaccine trial.

            https://www.zerohedge.com/political/moderna-covid-19-vaccine-induced-adverse-reactions-more-half-trial-participants

            The Fed

            The Fed’s liquidity confusion.

            https://www.aier.org/article/the-feds-liquidity-confusion/

           

            ***overnight, the ECB met and, as expected, left rates and its bond purchase program unchanged.

            https://www.zerohedge.com/markets/ecb-keeps-qe-rates-unchanged

            Bottom line.  despite a less than positive news flow, stocks continue to advance and are a short hair away from a run at their February highs.  If your portfolio does not have  decent cash reserves (15% at a minimum; I am at 50%), now is the time to build them.  Then set back and enjoy the rest of the ride.

            The latest from Bill Gross.

            https://williamhgross.com/wp-content/uploads/2020/07/The-Real-Deal-BG-IO-July-2020.pdf

    News on Stocks in Our Portfolios

 

BlackRock (NYSE:BLK) declares $3.63/share quarterly dividend, in line with previous.  

Johnson & Johnson (NYSE:JNJ): Q2 Non-GAAP EPS of $1.67 beats by $0.16; GAAP EPS of $1.36 beats by $0.18.

Revenue of $18.34B (-10.8% Y/Y) beats by $610M.

Economics

   This Week’s Data

      US

            Weekly jobless claims were 1,300,000 versus forecasts of 1,250,000.

            https://www.zerohedge.com/personal-finance/over-50-million-americans-have-now-filed-first-time-jobless-benefits-lockdowns

            June industrial production rose 5.4% versus estimates of +4.3%; capacity utilization was 68.6 versus 67.7.   

            https://www.calculatedriskblog.com/2020/07/industrial-production-increased-54.html

                June retail sales rose 7.5% versus expectations of +5.0%; ex autos, they were up 7.3% versus +5.0%.

            https://www.zerohedge.com/personal-finance/us-retail-sales-soar-june-led-clothing-demand

            The July Philadelphia Fed manufacturing index was reported at 24.1 versus projections of 20.0.

     International

            May UK unemployment came in at 3.9% versus consensus of 4.2%; average earnings fell 0.3% versus -0.4%.

            June Chinese unemployment was 5.7%, in line; YoY industrial production was +4.8% versus 4.7%; YoY retail sales were -1.8% versus +0.3%; YoY fixed asset investment was -3.1% versus -3.3%; Q2 GDP rose 11.5% versus +9.6%.

    Other

            Mortgage delinquencies soar.

            https://www.zerohedge.com/personal-finance/it-starts-mortgage-delinquencies-suddenly-soar-record-pace

What I am reading today

           

            The rising trend toward home schooling.

            https://www.zerohedge.com/political/back-school-no-thanks-say-millions-newly-homeschooling-parents

Visit Investing for Survival’s website (http://investingforsurvival.com/home) to learn more about our Investment Strategy, Prices Disciplines and Subscriber Service.