The Morning Call---And the beat goes on.

The Morning Call

7/15/20

The Market

         

    Technical

The Averages  (26642, 3197) had a blockbuster day, though volume was down and stocks are nearing overbought territory.  The Dow finished above its 200 DMA (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.  On the other hand, they are still out of sync with respect to those ‘island tops’ [the S&P filled that gap, the Dow has not].    As I have noted previously, stocks will be directionless until those inconsistencies are corrected.

https://www.marketwatch.com/story/for-nasdaq-rally-skeptics-remember-that-momentum-doesnt-die-easily-2020-07-13?mod=home-page

            Option traders set new speculative record.

            https://sentimentrader.com/blog/options-traders-set-new-speculative-record--13-7-2020/

Still, the short term the technical picture is improving.  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, yesterday was a repeat of Monday---gold was up, the long bond was up and the dollar was down.  This collective pin action is consistent with itself and with a weak economic outlook.

            What is the Treasury market trying to tell us?

            http://www.capitalspectator.com/parsing-the-treasury-markets-mixed-messages/

Tuesday in the charts.

https://www.zerohedge.com/markets/dow-outpaces-nasdaq-3rd-straight-day-bonds-bullion-bitcoin-bid

    Fundamental

       Headlines

            The economy

Yesterday was a big one for data.  In the US, the stats were mixed:  month to date retail chain store sales growth and the June small business optimism index were better than expected while the June budget deficit and June CPI were disappointing.

Overseas,

The May UK trade balance and manufacturing production plus the July EU economic sentiment came in ahead of estimates;  May UK industrial production and the June German CPI were in line; May Japanese industrial production, May UK GDP, May EU industrial production, the June Chinese trade balance and July German economic sentiment were below expectations.

              

            The recovery maybe fizzling.

            https://www.washingtonpost.com/business/2020/07/11/after-fastest-recession-us-history-economic-recovery-may-be-fizzling/

                        A surge in small business bankruptcies.

            https://www.zerohedge.com/personal-finance/surge-small-business-bankruptcies-underway

                Mohamed El Erian warns that financial stress is far from over.

            https://www.zerohedge.com/markets/el-erian-warns-financial-stress-covid-far-over

                

            The coronavirus

            An opposing view.

                https://www.wired.com/story/larry-brilliant-on-how-well-are-we-fighting-covid-19/

                Florida labs admit ‘major error’.

            https://www.zerohedge.com/geopolitical/several-florida-labs-report-positivity-rates-100

                      

            China

            US/China trade data shows signs of recovery.

            https://politicalcalculations.blogspot.com/2020/07/us-china-trade-data-shows-start-of.html#.Xw3u5ShKg2w

            US says China’s ‘island building’ in the South China Sea is unlawful.

            https://www.bbc.com/news/world-us-canada-53397673

            Trump signs China sanctions bill.

            https://www.zerohedge.com/political/watch-live-trump-details-aggressive-new-china-policy-during-rose-garden-briefing

            Bottom line.  the beat goes on.  Marginal improvement in the economy; the media and the politicians intent on making matters worse by keeping the economy in lockdown; Trump (correctly) poking the Chinese in the eye; and stock prices soar.  God bless the Fed; at least until this Ponzi scheme collapses.

            July BofA fund manager survey.

            https://www.zerohedge.com/markets/near-record-numbers-wall-street-say-stocks-again-overvalued-just-14-believe-v-shaped

            Passive investing and the mispricing of assets.

            https://www.zerohedge.com/markets/passive-fingerprints-are-all-over-crazy-market

    News on Stocks in Our Portfolios

 

            Cummins (NYSE:CMI) declares $1.311/share quarterly dividend, in line with previous.

Procter & Gamble (NYSE:PG) declares $0.7907/share quarterly dividend, in line with previous.

Economics

   This Week’s Data

      US

            Month to date retail chain store sales growth fell less than in the prior week.

            Weekly mortgage applications rose 5.1% while purchase applications declined 6.1%.

            The July NY Fed manufacturing index came in at 17.2 versus consensus of 10.0.

     International

            The June Japanese trade balance was +$1.278 billion versus expectations of +$1.11 billion.

            June UK CPI was up 0.1% versus estimates of 0.0%; core CPI was +0.2% versus -0.1%.

    Other

            Leading index for commercial real estate declined in June.

            https://www.calculatedriskblog.com/2020/07/leading-index-for-commercial-real.html

What I am reading today

The social security funding crisis has arrived.

https://www.zerohedge.com/markets/gary-shilling-social-securitys-funding-crisis-has-arrived

            Quote of the day.

            https://cafehayek.com/2020/07/bonus-quotation-of-the-day-494.html?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+CafeHayek+%28Cafe+Hayek%29

            Who is making decisions about our lives?

            https://www.aier.org/article/who-is-making-decisions-about-our-lives/

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Monday Morning Chartology

The Morning Call

12/9/19

The Market

         

    Technical

            What a week for the S&P. A gap down open on Tuesday which hasn’t been filled and then a gap up open on Friday that needs to be filled.  And don’t forget the October 11^th gap up open waiting to be closed.  While long term momentum remains to the upside with the S&P above both MA’s and in uptrends across all timeframes, all these gap opens suggest to me that short term traders are controlling the pin action which is not healthy and could be an indication that the Market is entering or has already entered a blow off top.

            https://www.zerohedge.com/markets/sell

            The long bond performed more in line with the technical norms.  It gapped down on Monday, gapped up on Tuesday, then spent the rest of the week filling both.  That leaves the long term momentum to the upside. But that is starting to be challenged given that  (1) on Friday, the 100 DMA reverted to resistance, (2) it continues trade in a trend of lower highs and (3) it is approaching the lower boundary of its very short term uptrend. 

            I noted in last Friday’s Morning Call that, of late, the dollar had exhibited the most stable pin action among the indicators that I follow.  It was moving steadily downward throughout the week, resetting its short term trend from up to a trading range and challenging its 100 DMA on Thursday.  Then it gapped up on Friday’s open, its investors joining the schizophrenic behavior of their brothers in stocks, bonds and gold.

            GLD shared in last week’s volatility.  It had a gap up open on Tuesday which never got filled.  Then gapped down on Friday’s open, leaving two gap opens in the same week.  Both need to be filled.  Short term, the most important thing to note about this chart is the continuing trend of lower highs.

            After rocketing higher on Monday and Tuesday, the VIX spent the rest of the week drifting back into a range indicating complacency.  I can’t resolve in my mind how investors can be at once complacent but also react so violently to headlines that aren’t sudden exogenous events.  But it makes me nervous.

    Fundamental

       Headlines

            Big headlines this week:

                        FOMC meets Tuesday/Wednesday.

                        ECB meets Thursday.

                        UK elections on Thursday.

                        Tariff deadline on Sunday.

            The angst of John Mauldin.

            https://www.advisorperspectives.com/commentaries/2019/12/06/inflationary-angst

            More on the September repo funding problem.

            https://www.zerohedge.com/markets/fed-was-suddenly-facing-multiple-ltcms-bis-offers-stunning-explanation-what-really-happened

            China retaliates for Huawei.

            https://www.zerohedge.com/geopolitical/china-retaliates-huawei-beijing-orders-all-government-offices-and-public-companies

    News on Stocks in Our Portfolios

 

           

Economics

   This Week’s Data

      US

     International

            Q3  Japanese GDP growth was +0.4% versus consensus of +0.2%.

            The October German trade surplus was E21.5 billion versus forecasts of E17.5 billion.

    Other

            Credit card usage surges in October.

            https://www.zerohedge.com/markets/october-credit-card-usage-surges-all-time-high-americans-regain-their-spending-mojo

            OPEC and Russia agree to oil production cutbacks.

            https://www.nytimes.com/2019/12/05/business/opec-oil-production-cuts.html

What I am reading today

            Twenty highest paid coaches in American sports.

                        https://www.forbes.com/sites/kurtbadenhausen/2019/12/05/the-20-highest-paid-coaches-in-american-sports/?utm_source=newsletter&utm_medium=email&utm_campaign=daily-dozen&cdlcid=5d01057f1802c8c524bb7dcd#2cbcab334fae

            Social Security is not the financial lifeline you might think it is.

            https://www.usatoday.com/story/money/2019/12/04/social-security-lifeline-retirement-money-benefits/40730379/

            A perfect example of conspicuous consumption.

            https://www.marketwatch.com/story/someone-paying-120000-for-a-banana-duct-taped-to-a-wall-at-art-basel-is-the-perfect-picture-of-wealth-inequality-2019-12-05

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The Morning Call--Challenging the all-time highs

The Morning Call

4/24/19

The Market

         

    Technical

So much for more consolidation.  Clearly, last week’s pause was all Mr. Market needed before the Averages (26656, 2933) resumed their advance.  While volume was up, it was barely so---and off a very anemic showing on Monday; breadth also improved though much less than I would have expected.  The Dow closed right on its all-time high (it traded above this level on an unsuccessful challenge) as well as the lower boundary of its very short term uptrend.  The S&P is still short of its all-time high (2942), but just slightly.  It also reestablished a very short term uptrend which will be confirmed if remains there through the close today. 

The VIX down fractionally, certainly not corresponding to a strong move up in stock prices and indicating that it may be stretched to the downside.

            https://www.zerohedge.com/news/2019-04-23/volatility-dead-until-it-isnt

            More.

            https://www.zerohedge.com/news/2019-04-22/has-never-happened

The long bond was up ¼ %.  Nevertheless, it still ended near the lower boundary of its very short term uptrend.  Its chart, at present, is strong; though clearly voiding its very short term uptrend would raise directional questions. 

             The dollar rose 3/8%, remaining technically strong, hitting another high in its advance since early 2018 and is forty cents away from a twenty year high.  In doing so, it experienced another gap up open, creating a second gap that needs to be filled.  However, as I mentioned yesterday, doing so would do little damage to its chart. 

            GLD was down another ¼%. Its 100 DMA is now resistance and gold appears headed for the lower boundary of its short term uptrend (seven points lower).

            https://moneyweek.com/505336/modern-monetary-theory-mmt-why-you-need-to-own-gold/

            Later.

            https://www.zerohedge.com/news/2019-04-23/gold-plunges-towards-key-technical-level-after-15-billion-notional-dump

Bottom line: clearly, I was wrong thinking stocks would consolidate further. However, the conditions that gave rise to that assumption haven’t changed: (1) the VIX is reflecting a very high level of investor complacency, historically a sign of lower stock prices and (2) the April 1^st gap up open still needs to be closed.  Further, the 26656/1942 (all-time highs) levels should pose some, if not a lot of, resistance---meaning that I believe it reasonable to think that the indices confirming a break above those highs will take some work.

            I remain a bit confused by the price action of the other indicators that I follow. The dollar is pointing to a stronger economy/higher interest rates; though there is very little in the numbers pointing to a stronger economy.  The strong dollar explains the poor performance in gold.  However, while the long bond has been hinting at the stronger economy/higher interest rate narrative, it has yet to confirm that narrative.

            Tuesday in the charts.

            https://www.zerohedge.com/news/2019-04-23/stocks-soar-record-highs-earnings-macro-risk-aversion-plunge

    Fundamental

       Headlines

            The economic data improved yesterday: month to date retail chain store sales and (in particular) March new home sales were positive while the April Richmond Fed manufacturing index was disappointing.  Overseas the April EU flash consumer confidence index was lower than anticipated.

            Bottom line: the Market was really the story yesterday.  And, as we all know, it was a big plus, notwithstanding scaled back trade hopes, mediocre economic data and saber rattling in the Persian Gulf.  Of course, universal monetary policy mischief cures a lot of ills.

    News on Stocks in Our Portfolios

Economics

   This Week’s Data

      US

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

The February Case Shiller home price index rose 0.3%, in line.

March new home sales were up 4.5% versus estimates of -2.5%.

https://www.advisorperspectives.com/dshort/updates/2019/04/23/new-home-sales-up-4-5-in-march-beats-forecast

The April Richmond Fed manufacturing index came in at 3 versus forecasts of 10.

https://www.advisorperspectives.com/dshort/updates/2019/04/23/richmond-fed-manufacturing-moderate-growth-in-april            

            Weekly mortgage applications fell 7.3% while purchase applications were down 4.1%.

    International

                

             The April EU flash consumer confidence index was -7.9 versus expectations of -7.0.

             The February Japanese all industry index came in at -0.2 versus estimates of -0.1.

             The February Japanese leading economic indicators were 97.1 versus consensus of 97.4.

             April German business confidence was reported at 99.2 versus projections of 99.7, while consumer confidence was 10.4 versus 10.7.

                

    Other

            Trump’s Iranian oil gambit.

            https://www.nakedcapitalism.com/2019/04/trumps-iran-oil-market-gamble.html

            US/China trade contracts 9% in first year of trade war.

            https://politicalcalculations.blogspot.com/2019/04/direct-us-china-trade-contracts-9-in.html

            Auto sales aren’t nearly as strong as reported.

            https://www.advisorperspectives.com/commentaries/2019/04/22/auto-sales-arent-nearly-as-strong-as-reported

            Money supply versus demand (must read):

            http://scottgrannis.blogspot.com/2019/04/update-on-money-demand-currently-stable.html

Fed resigned to asset bubbles.

https://www.bloomberg.com/news/articles/2019-04-23/fed-seems-resigned-to-bubble-risk-in-effort-to-extend-expansion

            Who should Trump pick for the Fed’s Board of Governors?

            https://marginalrevolution.com/marginalrevolution/2019/04/who-should-trump-pick-for-the-fed-board-of-governors.html

           

What I am reading today

First, the good news in the 2019 Social Security trustees report.

            https://www.realclearmarkets.com/articles/2019/04/23/the_remarkable_news_behind_the_2019_social_security_trustees_report_103711.html

            Now, the bad news.

            https://reason.com/2019/04/22/social-security-will-be-insolvent-in-16-years/?fbclid=IwAR2VPX_O3c33OG4reTg4Op_uZZwmbkSiBZ37hZ61g1-sUN-a9H5QBdNTbDI

            Increasing demand for cryptocurrency payment solutions.

            https://www.zerohedge.com/news/2019-04-23/imf-poll-shows-real-demand-crypto-payment-solutions

            Eliminate student loans.

            https://www.nationalreview.com/2019/04/eliminate-federal-student-loans/

            Fifty years of climate change predictions.

            https://www.zerohedge.com/news/2019-04-23/fifty-years-apocalyptic-global-warming-predictions-and-why-people-believe-them

            Controlling what you haven’t thought of.

            http://mrzepczynski.blogspot.com/2019/04/risk-management-controlling-what-you.html

                Is diversification for idiots?

            https://valuestockgeek.com/2019/04/20/is-diversification-for-idiots/

                How many stocks should you own in your portfolio?

            https://intrinsicinvesting.com/2019/04/22/how-many-stocks-should-you-own-in-your-portfolio/

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Yhe Morning Call--Yesterday's pin action was inconclusive

The Morning Call

3/26/19

The Market

         

    Technical

The Averages (DJIA 25516, S&P 2798) rested (Dow up slightly, S&P down slightly) after a big Friday.   However minor its decline, the S&P still finished below the lower boundary of its very short term uptrend (if it remains there through the close today, that trend will be voided) and, more importantly, below the critical 2800 level (clearly below other technicians 2811/2815 resistance quad top).   This pin action was about as inconclusive as it could possibly be.  So, I am going to wait for a bigger move, in either direction, below coming to a conclusion about price direction.

            https://thereformedbroker.com/2019/03/25/the-false-breakout/

            And.

            https://awealthofcommonsense.com/2019/03/how-often-is-it-a-stock-pickers-market/

                Update on margin debt.

            https://www.advisorperspectives.com/dshort/updates/2019/03/24/margin-debt-and-the-market-up-2-25-mom

Volume fell and breadth was mixed.

The VIX declined 1%, attempting for a second day in a row to challenge its 200 DMA but failing.  It continues to mirror the S&P closely. 

The long bond rose on high volume, continuing to suggest more upside.  But remember, it gapped open last Friday and usually those gaps are closed.  At the risk of stating the obvious, bond investors are clearly expecting further rate declines (a weaker economy).

            https://www.investors.com/news/economy/inverted-yield-curve-dont-panic-copper-prices-key-dow-jones/

            And.

            https://thereformedbroker.com/2019/03/23/a-missing-caveat-to-last-weeks-sell-off/

            But global bond markets are signaling lower rates/economic slowdown.

            https://www.bloomberg.com/news/articles/2019-03-24/aussie-10-year-bond-yield-drops-below-1-8-to-new-record-low?srnd=premium

The dollar was up unchanged, ending with a positive chart (above both MA’s, in a short term uptrend and above a prior low). 

GLD continued its advance (up ¾ %) off a minor double bottom and remains above both MA’s and in a short term uptrend.

Bottom line: the S&P remains at an important crossroads, with Monday’s pin action providing little guidance.  To be sure, it closed below 2800; but not with enough authority to be directionally informative.

https://www.advisorperspectives.com/commentaries/2019/03/25/for-the-average-investor-the-next-bear-market-will-likely-be-the-last

TLT, GLD and UUP are, at the moment, pointing to lower interest rates/a weaker economy.

            How the shakeout in US markets are reverberating around the globe.

            https://www.bloomberg.com/news/articles/2019-03-25/here-s-how-the-shake-out-is-reverberating-around-global-markets

            Monday in the charts.

            https://www.zerohedge.com/news/2019-03-25/sp-swings-wildly-after-breaching-2800-support-yield-curve-crashes

    Fundamental

       Headlines

            Yesterday’s economic stats were mixed: the February Chicago Fed national activity index came in below expectations while the March Dallas Fed was above.

            Overseas, the data was also mixed: the January Japanese all activity index was below estimates while the March German business climate index was above.

            There was a lot of political headlines yesterday, but the only economic development that bears mentioning was the continuing decline in interest rates.

                         

Bottom line: I have beat the whole Fed policy U turn and the fall in interest rates to death since last Wednesday.  So I am not going to be repetitious except to say that the more powerful the move down in rates, the more likely I will have to lower my 2019/2020 economic growth forecast; and I am below consensus, so imagine the impact on stock prices of declining outlook for the economy and corporate earnings from the main stream pundits.

    News on Stocks in Our Portfolios

 

FactSet Research Systems (NYSE:FDS): Non-GAAP EPS of $2.42 beats by $0.08; GAAP EPS of $2.19.

Revenue of $354.9M (+5.9% Y/Y) misses by $1.56M.

Hormel Foods (NYSE:HRL) declares $0.21/share quarterly dividend, in line with previous.

Economics

   This Week’s Data

      US

            The March Dallas Fed manufacturing index was reported at 8.3 versus estimates of 7.0.

            https://www.calculatedriskblog.com/2019/03/dallas-fed-texas-manufacturing-activity.html

                February housing starts fell 8.7% versus forecasts of down 28.3%; building permits declined 1.6% versus expectations of -0.6%.

     International

    Other

Fake goods hit a half a trillion dollars in trade.

https://www.zerohedge.com/news/2019-03-25/forget-fake-news-trade-fake-goods-hits-half-trillion-dollars

Brexit update.

https://www.zerohedge.com/news/2019-03-26/pound-rallies-brexiteer-leader-tentatively-backs-mays-deal

What I am reading today

            Three reasons that your retirement shouldn’t hinge on social security.

            https://www.usatoday.com/story/money/personalfinance/retirement/2019/03/23/retirement-planning-social-security-benefit-cant-your-only-income/39222245/

            Quote of the day.

            https://cafehayek.com/2019/03/quotation-of-the-day-2742.html?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+CafeHayek+%28Cafe+Hayek%29

            Never confuse luck with being smart.

            https://www.bloomberg.com/opinion/articles/2019-03-25/never-confuse-luck-with-smart-investing

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