The Morning Call---No easy way out

 

The Morning Call

 

8/25/20

 

The Market

         

    Technical

 

The Averages  (28308, 3431)  had a great day, with the S&P blasting through its former all-time high (the Dow not).  That is a big plus.  However, (1) volume was weak, (2) both of the indices made a gap up open, joining those two gap up opens made three weeks ago, (3) the VIX was down only fractionally on strong up day in the Averages, continuing to reflect investor concern and (4) breadth remains in overbought territory [note: this overbought condition exists only in the indices.  As you can see in the articles below, breadth in the rest of the Market is awful.  This dichotomy makes the technical picture even worse.]  Nonetheless, I am sticking with my assumption that the Market’s bias remains to the upside long term.

 

                        More on negative breadth.

            https://politicalcalculations.blogspot.com/

 

            Even more.

            http://traderfeed.blogspot.com/2020/08/a-different-look-at-markets-weak-breadth.html

 

            Investors versus the newsletters.

            https://sentimentrader.com/blog/mom-pop-sell-while-newsletters-tell-them-to-buy--24-8-2020/

 

Gold and the long bond were down again though only fractionally.  GLD’s chart remains strong---it remains in the uptrend off its June low.  TLT ended above its 100 DMA (now resistance) for a second day (if it remains there through the close today, it will revert to support).  The dollar was up but has made a lower high---a negative.   

           

            Gold still shines.

            https://www.advisorperspectives.com/commentaries/2020/08/24/gold-still-shines-bright

 

            Conflicting Treasury market signals.

            http://www.capitalspectator.com/conflicting-treasury-market-signals-keep-investors-guessing/

 

            US Treasury over dependent on short term maturities.

            https://global-macro-monitor.com/2020/08/22/black-swan-hunting/

 

            Monday in the charts.

            https://www.zerohedge.com/markets/aaplocalypse-now-nasdaq-sp-hit-record-highs-bonds-bullion-slide

 

    Fundamental

 

       Headlines

 

              The Economy

 

                        US

 

Month to date retail chain store sales growth was much improved from the prior week.

 

                        International

 

                        Other

 

                          Eight high frequency economic indicators.

                          https://www.calculatedriskblog.com/2020/08/eight-high-frequency-indicators-for_24.html

 

                          Lower investment/production has nothing to do with a dollar shortage.

 https://www.forbes.com/sites/johntamny/2020/08/23/dismiss-the-federal-reserve-alarmism-theres-no-such-thing-as-  dollar-shortages/#7d3fea657fdc

                       

                          No ‘V’ for thee.

                          http://econbrowser.com/archives/2020/08/no-v-for-thee

 

                          Global companies raise record amount of funds in August.

  https://www.reuters.com/article/us-markets-global-fundraising/global-companies-raise-most-funds-for-the-month-of-august-in-a-decade-idUSKBN25K15H

                              

                          Mortgage delinquencies hit decade high,.

                          https://www.zerohedge.com/markets/mortgage-delinquencies-plus-90-days-due-hits-decade-high

 

            The coronavirus

 

              Hong Kong has first documented case of coronavirus reinfection.

              https://www.zerohedge.com/geopolitical/hong-kong-confirms-first-case-covid-19-reinfection-anywhere-world

 

              Sweden’s coronavirus strategy hints at herd immunity.

              https://www.zerohedge.com/medical/swedens-covid-19-measures-hint-herd-immunity-us-experts-rethink-lockdown-strategies

 

            The Fed

 

              Powell to introduce revised Fed policy on inflation.

              https://www.zerohedge.com/markets/previewing-powells-j-hole-jawbone-buy-gold-case-it-all-goes-wrong

 

            China

 

              US/China trade talks back on.

              https://www.zerohedge.com/geopolitical/us-sees-progress-after-call-china-discussing-phase-1-deal-yuan-jumps

 

            Bottom line.  No easy way out.

              https://www.zerohedge.com/markets/its-getting-worse-every-shock-bofa-turns-apocalyptic-coming-end-game

 

              Where to invest for income.

              https://www.morningstar.com/articles/998976/where-to-invest-for-income

 

    News on Stocks in Our Portfolios

 

Medtronic (NYSE:MDT): FQ1 Non-GAAP EPS of $0.62 beats by $0.44; GAAP EPS of $0.36 beats by $0.62.

Revenue of $6.51B (-13.1% Y/Y) beats by $1.03B.

 

Hormel Foods (NYSE:HRL): FQ3 GAAP EPS of $0.37 beats by $0.02.

Revenue of $2.38B (+3.9% Y/Y) in-line.

 

Bank of Nova Scotia (NYSE:BNS): FQ3 Non-GAAP EPS of C$1.04 misses by C$0.07; GAAP EPS of C$1.04 in-line.

Revenue of C$7.73B (+0.9% Y/Y) misses by $210M.

 

Bank of Nova Scotia (NYSE:BNS) declares CAD 0.90/share quarterly dividend, in line with previous.

 

What I am reading today

 

            The 4% rule is dead.  What should retirees do now?

            https://www.zerohedge.com/personal-finance/4-rule-dead-what-should-retirees-do-now

 

            Quote of the day.

            https://cafehayek.com/2020/08/quotation-of-the-day-3262.html?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+CafeHayek+%28Cafe+Hayek%29

 

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--Willful blindness

Monday Morning Chartology

The Morning Call

 

8/3/20

 

The Market

         

    Technical

 

            The S&P continues to plod forward, though breadth is a bit overextended, the Dow is not following suit and the VIX is not helping.  Still, the upward momentum, however labored, is there; and my assumption is that it will remain so until, as or if the Fed steps on its own dick.

 

            While the long bond was off fractionally on Friday, it has maintained its journey to all time highs.  TLT and GLD are both having an easier time than stocks pushing higher; though they are all being helped along by the same force (QEInfinityForever).  TLT and GLD also have the added advantage of a weak economy.

 

            Gold remains the standout performer.  It is now challenging the upper boundary of its long term uptrend for the second time in a week.  Of course, given its current ten day spike, it has left several gap up opens and breadth is well overbought.  So, some consolidation is likely in the near future.  The question is, will it occur after it has made a new all-time high or falter before it does so?      

 

            The dollar’s chart has been and is a mirror image of the above three---technically awful---largely for the same reasons: a weak economy and QEInfinityForever.   As you can see, it challenged the lower boundary of its short term downtrend on Thursday and bounced on Friday.  While not a trend changer, it could be signaling an oversold rebound near term.

            https://www.zerohedge.com/markets/feds-dollar-debasement-will-trigger-unprecedented-structural-shift

 

            The VIX remains stuck between its June low and its 200 DMA, offering little indication that investor confidence is improving.

                

                

             Friday in the charts.

             https://www.zerohedge.com/markets/silver-soars-best-month-79-dollar-dumps-most-decade

 

    Fundamental

 

       Headlines

 

              The Economy

             

                        Review of last week

 

The overall US data last week was upbeat; however, the primary indicators  were negative.  So, the US recovery continues a bit bumpy---hardly a ‘V’. 

 

Overseas, the stats were much more positive.  If this trend continues, it will ultimately be a plus for the US.

            https://www.advisorperspectives.com/commentaries/2020/07/31/european-resurgence

 

Longer term, the economic growth will be influenced by how quickly virus  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

 

                          The July German manufacturing PMI came in at 51 versus estimates of 50.

 

The July UK manufacturing PMI was reported at 53.3 versus forecasts of   53.6.

 

                        Other

 

              Fitch lowers US government credit rating.

              https://www.zerohedge.com/markets/ficth-revises-united-states-credit-outlook-negative

 

              Ship orders collapse.

              https://www.zerohedge.com/markets/ship-orders-collapse-will-rate-boom-follow

 

The coronavirus

 

  ***overnight update.

  https://www.zerohedge.com/geopolitical/melbourne-declares-state-emergency-covid-19-outbreak-worsens-mexico-deaths-pass-uk

 

  Tenant versus landlord.  The new battleground.

  https://www.zerohedge.com/markets/rent-moratorium-expires-landlord-tenant-battles-begin

 

The Fed

 

  Powell is a barely adequate fiction writer.

  https://www.realclearmarkets.com/articles/2020/07/31/jerome_powell_is_a_barely_adequate_writer_of_fiction_500680.html

 

  The next iteration of QEInfinityForever.

  https://www.zerohedge.com/markets/fed-planning-send-money-directly-americans-next-crisis

 

China

 

  Xi decides to turn inward.

  https://www.zerohedge.com/markets/xis-decision-turn-inward-dangerous-trade

 

  US announces new measures against Chinese software companies.

  https://www.zerohedge.com/geopolitical/us-announces-new-action-against-array-chinese-software-companies

 

Bottom line.  QEInfinity/Forever remains the dominant investment theme.                                                                However, as you know, I believe that massive injections of liquidity by the global central banks’ QEInfinity policies have done little to spur economic growth and, indeed, have inhibited it by destroying the functionality of the pricing of risk and the efficient allocation of capital; and that there will be an ultimate price to pay both for the economy and the securities markets. 

            https://www.zerohedge.com/markets/insanely-stupid-chase-stocks-economy-plunges

 

That said, throughout the entire QEInfinity experiment, investors have shown a  complete disregard for its consequences and instead have used the increased liquidity to bid up asset prices to grossly inflated valuations.  Until that changes, the bias in stock prices will remain to the upside.

 

I believe that the Averages and most segments of the Market are overvalued [as determined by my Valuation Model].  This is not a time to be buying equities.

                       

Nonetheless, there are certain segments of the Market that have been punished    severely  with the stocks of the companies serving those industries down 30-70%.  As a result, I will be putting cash to work in these beaten up stocks on any Market decline.  

 

    News on Stocks in Our Portfolios

 

Donaldson (NYSE:DCI) declares $0.21/share quarterly dividend, in line with previous.

 

Illinois Tool Works (NYSE:ITW): Q2 GAAP EPS of $1.01 beats by $0.31.

Revenue of $2.56B (-29.1% Y/Y) beats by $220M.

 

Exxon Mobil (NYSE:XOM): Q2 Non-GAAP EPS of -$0.70 misses by $0.10; GAAP EPS of -$0.26 beats by $0.28.

Revenue of $32.61B (-52.8% Y/Y) misses by $5.55B.

 

 

What I am reading today

 

            Quote of the day.

            https://cafehayek.com/2020/07/bonus-quotation-of-the-day-504.html?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+CafeHayek+%28Cafe+Hayek%29

 

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--Lockdown 2.0 and stocks seem ambivalent

The Morning Call

7/14/20

The Market

         

    Technical

The Averages  (26085, 3155) had a volatile day but ended basically flat (Dow up slightly, S&P down slightly).  Volume was up; and breadth was OK.  The indices remained out of sync on (1) their 200 DMA’s [Dow below---intraday, it moved above its 200 DMA but failed to hold it; S&P above] and (2) those ‘island tops’ [the S&P filled that gap, the Dow has not].  So, the Averages are now out of sync on two resistance/support levels.  As I have noted previously, stocks will be directionless until those inconsistencies are corrected.

Still, the short term the technical picture has improved.  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.

           

Gold was up, maintaining its move to ever higher seven year highs. The long bond was also up and the dollar was down.  This collective pin action is consistent with itself and with a weak economic outlook.

            A negative view of gold.

            https://financialducksinarow.com/14149/the-day-i-was-asked-if-i-buy-and-sell-gold/

            Monday in the charts.

            https://www.zerohedge.com/markets/big-tech-soars-bonds-bid-pandemic-gets-worse-worse-worse

    Fundamental

       Headlines

The economy

Only one datapoint released yesterday.  The US June budget deficit was marginally larger than anticipated.

An improved growth outlook from Wall Street.

http://econbrowser.com/archives/2020/07/an-improved-gdp-outlook-from-wall-street

Six high frequency indicators of recovery.

https://www.calculatedriskblog.com/2020/07/six-high-frequency-indicators-for_13.html

The default wave arrives.

https://www.zerohedge.com/markets/biblical-default-wave-arrives-here-avalanche-bankruptcies-unleashed-coronavirus

            The coronavirus

            US death rate rising; but a third of it is unrelated to the coronavirus.

            https://www.studyfinds.org/u-s-death-rate-soaring-but-more-than-a-third-are-not-caused-by-covid-19/

           

            The Fed

            The Fed’s $3 trillion coronavirus rescue has created multiple market bubbles.

            https://www.reuters.com/article/us-health-coronavirus-federalreserve-mar/federal-reserves-3-trillion-virus-rescue-inflates-market-bubbles-idUSKCN24E13G

            The Fed releases its purchase schedule for the next two weeks.

            https://www.zerohedge.com/markets/fed-releases-pomo-schedule-next-two-weeks-will-buy-9bn-treasuries-and-mbs-each-day

            Dallas Fed chief says Fed purchases will be cut back as economy improves.

            https://www.zerohedge.com/markets/stocks-slide-after-feds-kaplan-says-emergency-facilities-be-pulled-back-economy-improves

            The Fed is trapped in QE.

            https://www.zerohedge.com/markets/fed-trapped-qe-interest-rates-cant-rise-ever-again

            China

            Trump planning to scrap audit deal for US listed Chinese firms.

            https://www.zerohedge.com/geopolitical/tensions-soar-trump-admin-could-scrap-audit-deal-us-listed-chinese-firms

            UK bars Huawei from supplying 5G network.

            https://www.zerohedge.com/geopolitical/uk-bars-huawei-supplying-5g-network-major-reversal-johnson

                China warns of sanctions against Lockheed Martin following arms deal.

            https://www.zerohedge.com/markets/beijing-sanctions-lockheed-martin-over-torpedos-taiwan-arms-deal

                

            Bottom line.  valuations are extremely generous though (1) the media insists on emphasizing the worst case for the coronavirus which is not being helped by the politicians [California in new lockdown], (2) the macroeconomic data is improving although a ‘V’ shaped recovery is a stretch; indeed, the lockdown which is returning as the preferred anecdote to the coronavirus is wrecking whole segments of the economy (3) Q2 earnings season began yesterday and expectations are abysmal.  And yet, the indices and many stocks are a short hair away from their all-time highs.

            Investors owe it all to QE.  And, at the moment, it appears that they have nothing to fear regarding a reversal of this extraordinarily irresponsible policy.  I sleep well because of my large cash position; but I clearly enjoy higher stock prices.

            This is nuts……..again.

            https://www.advisorperspectives.com/commentaries/2020/07/13/this-is-nuts-again-reducing-risk-as-tech-goes-1999

Knowing when you have won.

https://moneymaven.io/etf/macro/knowing-when-you-ve-won-4-udfWWunkucVGCt7uyRuQ

Don’t fall in love with your stocks.

https://blairbellecurve.com/dont-fall-in-love-with-your-stocks/

Wall Street concludes that it is bullish whoever wins in November.

https://www.zerohedge.com/markets/wall-street-concludes-no-matter-who-next-president-it-will-be-bullish-stocks

    News on Stocks in Our Portfolios

 

           

Economics

   This Week’s Data

      US

            The June budget deficit was $864 billion versus forecasts of $863 billion.

            June CPI came in at +0.6% versus consensus of +0.5%; core CPI was +0.2% versus +0.1%.

            The June small business optimism index was reported at 100.6 versus estimates of 92.0.

     International

            May Japanese industrial production fell 8.9% versus expectations of -8.4%.

            The May UK trade balance was +L4.3 billion versus projections of -L0.8 billion; industrial production was +0.6%, in line; GDP grew 1.8% versus 5.5%; manufacturing production was up 8.4% versus 8.0%.

            May EU industrial production was up 12.4% versus predictions of +15.0%; July economic sentiment came in at 59.6 versus 51.0.

            The June Chinese trade balance was $46.4 billion versus forecasts of $58.6 billion.

            The June German CPI was up 0.6%, in line; July economic sentiment was 59.3 versus 60.0.

    Other

            The collapse of the oil and gas industry.

            https://www.nakedcapitalism.com/2020/07/wolf-richter-the-great-american-shale-oil-gas-massacre-bankruptcies-defaulted-debts-worthless-shares-collapsed-prices-of-oil-gas.html

What I am reading today

            Yesterday in the interest of political correctness, the Washington Redskins management is renaming the team.  Here are some other more descriptive suggestions: “The Washington Lobbyists.” “The Washington Special Interests.” “The Washington Underpaid Holders of Useless Masters’ Degrees Working at NGOs.” “The Washington Logrollers.” “The Washington Vulnerable Incumbents.” “The Washington Expense Accounts.” “The Washington Blusterers.” “The Washington Anonymous Sources.” “The Washington Backstabbers.” “The Washington Midlevel Bureaucrats.” “The Washington GS-13s.” “The Washington Gridlock.” “The Washington Demagogues.” For my academic friends, “The Washington Rent-Seekers.”

            The anniversary of the Northwest Ordinance.

            https://www.aei.org/society-and-culture/happy-birthday-empire-of-liberty/

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