The Morning Call
6/5/20
The
Market
Technical
After a day of see
sawing between being plus or minus, the Averages (26281, 3112) closed mixed on the day (Dow
up. S&P down)---not surprising given their increasingly overbought
condition. Both of the indices remain in
very short term uptrends. Having
successfully challenged its 100 DMA, the DJIA finished right on its 200 DMA---for
stocks to maintain upward momentum, it needs to catch up to the S&P which
is already well above its 200 DMA. The
one negative is those huge 5/18 gap opens that remain unfilled but which, at
the moment, appear irrelevant. My
assumption continues to be that equity prices’ bias is to the upside.
GLD bounced hard
off the upper boundary of its short term uptrend, leaving its upward trend
intact. Meanwhile, the long bond made a
new lower low and ended right on its 100 DMA (now support). The dollar was down again on volume,
remaining in a newly reset very short term downtrend. The deviation of gold
from TLT and UUP points to rising inflation fears. Of course, this is a one day phenomena; so, we
need more time to confirm that thesis.
Thursday in the charts.
Fundamental
Headlines
The
economy
Yesterday’s
numbers were negative. Weekly jobless
claims, Q1 unit labor costs and the April trade balance did not meet
expectations while Q1 nonfarm productivity was much better than anticipated.
The
recovery alphabet soup.
How
valid is the Markets optimism for economic recovery?
More fiscal
stimulus coming.
Overseas, April
EU retail sales, the May EU construction PMI came in above estimates while the May
UK construction was below.
The
coronavirus
Looters,
lockdowners and the law.
Did
Sweden’s strategy backfire?
The
Fed
The Powell bubble.
Reality
repression.
Bottom line. barring an unexpectedly damaging second wave
of the coronavirus, the economy is likely through the worst of the recession. However, as I continue to note, we still have
no idea what the lockdown’s ultimate impact will be on American’s spending,
social and work habits.
And yet, investors
are tip toeing through the tulips. To me the only explanation for this total
breakdown of the relationship between price and value is QE; and I have no clue
when and how this disconnect corrects itself.
Invest accordingly.
The latest from
Jeremy Grantham.
The case for buying
everything.
More
on valuations.
Hedge
funds brace for second stock market decline.
Don’t
overjudge yourself.
This analyst makes
a great point: a major axiom of Wall
Street is to not let a trade turn into an investment (i.e. buy a stock for a
quick pop, you are wrong and instead of selling immediately, you hold on and
watch it go down further). But what do
you do when an investment turns into a trade? (i.e. you buy a stock to hold for
the long term and it skyrockets to your price objective almost immediately---like
what is happening now with stocks bought in late March that have since appreciated
40-50%.) I would be a Seller but it is
an interesting problem to ponder.
News on Stocks in Our Portfolios
Economics
This Week’s Data
US
May
nonfarm payrolls increased 2,509,000 jobs versus and anticipated decline of
8,000,000; the unemployment rate was 13.3% versus projections of 19.8%.
International
April
Japanese household spending fell 6.2% versus forecasts of -8.7%; its April
leading economic indicators came in at 76.2 versus 84.5.
April
German factory orders declined 25.8% versus estimates of -19.7%.
May
UK consumer confidence was reported at -36 versus expectations of -34.
Other
Commercial
versus household bankruptcies in May 2020.
Median household income
in April 2020.
What
I am reading today
Americans can’t agree on
what to be outraged about.
Why patents work.
Self-diluting euphemisms.
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