The Morning Call
7/27/20
The
Market
Technical
Having filled the
June ‘island top’ gap, pushed through its June high and established a very
short term uptrend, the S&P ended last week on its back foot. However, stocks had gotten a bit overbought;
so, I think that there is no reason to assume that this drop was anything out
of the ordinary. I continue to believe
that the trend is up and that it is just a matter of time until S&P’s
February high is challenged.
Fed stimulus has
created the ‘cobra effect’.
While the long
bond’s chart does not show short term momentum as strong as either the S&P’s
or GLD’s, long term, it is the only major index that I regularly refer to that
is above the upper boundary of its long term uptrend. Hence, it is pretty safe to say that bond
price (interest rates) remain is a solid uptrend (downtrend).
A short term chart
doesn’t get much better than GLD’s. It has
strong upside momentum, is above both DMA’s and in uptrends across all timeframes
except its long term---and there is no resistance between the current price
level (178.70) and the upper boundary of its long term trading range (185.85). So, it seems reasonable to assume that GLD
will challenge that boundary at the very least.
Then we have the
dollar. Last week, it reset its short
term trend to down. Coupled with declining
interest rates and rising gold prices, that suggests a weakening economy---which
makes higher stock prices the odd man out in this scenario. But, of course, there is the Fed.
Friday’s
pin action in the VIX was a bit of a surprise.
Normally, the VIX advances on a down Market day---which it tried to do
early in the trading session but then failed. However, it does support the notion that equity
prices are headed higher. And why
not? There is the Fed.
Fundamental
Headlines
The
Economy
Summary
from last week.
The data (and
primary indicators) last week were down..
The overseas stats were quite positive.
Short term, the economic numbers keep yo yoing around
leaving the magnitude and shape (V, U, W, etc.) of recovery in question---made
more so as lockdowns are being re-imposed nationwide.
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 term 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.
US
International
Other
The
coronavirus
Gunshot to the head attributed of the coronavirus.
Eviction moratorium expired on Friday.
The
Fed
Interview with Jim Grant (must read):
Bottom
line.
The latest from John Mauldin.
News on Stocks in Our Portfolios
What
I am reading today
Massive black hole
disappeared then reappeared.
Getting to know wasps.
Patriotic dissent.
The French Revolution and the Woke
Revolution (must read):
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