The Morning Call--The stock market disconnect

 

The Morning Call

 

10/7/20

 

The Market

         

    Technical

 

            The Averages  (27772, 33360) were headed higher on the day only to get smashed following Trump’s instructions to republicans to halt stimulus bill negotiations (after seeing the impact on the Market, he revised his position saying he would entertain directed [like airline bailout] stimulus legislation) and the release by the house dems accusing big tech of possessing monopoly power. 

            https://www.zerohedge.com/technology/house-democrats-game-plan-breaking-big-tech-leaks

 

While both of the indices held above their very short term trend of higher lows, the two gap up opens down below remain---which, as you know, I believe will have to be filled.  I still believe that the Market’s long term bias is to the upside and will remain so as long as investors buy into QEInfinity/Forever.

 

            The fear barometer is not showing much fear.

            http://mrzepczynski.blogspot.com/2020/10/csfb-fear-barometer-why-is-fear-stable.html

 

Gold was off 1 1/8%, remaining within a short term trend of lower highs.  TLT  bounced off its 200 DMA (now support) but continues to trade in a trend of lower highs.  The dollar was also up, rebounding off the developing trend of higher lows.  Clearly, these indicators had no follow through to Monday’s dramatic performance, leaving me with directional uncertainty and wondering what investors are trying to discount.

 

            Is the spike in yields a sign of reflation?

            http://www.capitalspectator.com/latest-rise-in-10-year-yield-stirs-reflation-forecasts-again/

 

            Tuesday in the charts.

            https://www.zerohedge.com/markets/shart-deal-stocks-bond-yields-puke-trump-no-stimulus-tweet

 

    Fundamental

 

       Headlines

 

              The Economy

 

                        US

 

Weekly mortgage applications rose 4.6% but purchase applications fell 1.5%.

 

The August job openings (JOLTS) report showed available jobs at 6.5 million versus projections of 6.7 million.

                          https://www.advisorperspectives.com/dshort/updates/2020/10/06/job-openings-labor-turnover-august-2020-update

 

                        International

                          

Preliminary August Japanese leading economic indicators came in at 88.8 versus estimates of 88.0.

 

                        Other

 

                          WTO updates (lowers) its 2021 global trade forecast.

                          https://www.zerohedge.com/economics/wto-revises-global-trade-slump-forecast-sees-weaker-2021-rebound

 

                          Dry bulk shipping rates hit 2020 high.

                          https://www.zerohedge.com/commodities/dry-bulk-shipping-rates-hust-hit-new-2020-high

 

 

                        The Fed

 

I have repeatedly focused on the negative consequences of the Fed’s QEInfinity/Forever policy, one of which is increasing income inequality.  Here are two articles on the potential fallout if this issue is not addressed.

 

Whatever comes after Trump and Biden will be worse---a bit melodramatic but only a bit.

              https://thereformedbroker.com/2020/10/05/whatever-comes-after-trump-and-biden-will-be-worse/

 

              Mohamed El Erian’s more circumspect take on the above issue.

   https://www.project-syndicate.org/commentary/tenuous-factors-behind-strong-markets-despite weakening-fundamentals-by-mohamed-a-el-erian-    2020-10

 

In a speech to the National Association of Business Economics, Powell argued for more fiscal stimulus. 

              https://www.zerohedge.com/markets/watch-fed-chair-powell-ask-congress-more-fiscal-stimulus

 

That is not new news, but it comes on a day that Trump shut down stimulus bill   negotiations.

                  https://www.zerohedge.com/markets/stock-plunge-after-trump-says-he-ordering-halt-stimulus-talks-until-after-election

 

 

            The coronavirus

 

              A curve ball is not an existential threat.

              https://www.aier.org/article/a-curveball-isnt-an-existential-threat/

 

              Restaurant spending almost back to pre-coronavirus levels.

              https://www.zerohedge.com/economics/us-restaurant-spending-almost-back-pre-covid-levels

           

            Bottom line.  The stock market disconnect.

              https://www.project-syndicate.org/commentary/stock-market-disconnect-covid-sparing-publicly-traded-firms-by-kenneth-rogoff-2020-10

 

              Finding opportunity beyond the megacaps.

              https://www.morningstar.com/articles/1002478/stock-market-outlook-finding-opportunity-beyond-mega-caps

 

    News on Stocks in Our Portfolios

 

Paychex (NASDAQ:PAYX): FQ1 Non-GAAP EPS of $0.63 beats by $0.08; GAAP EPS of $0.59 beats by $0.08.

Revenue of $932.2M (-6.0% Y/Y) beats by $43.93M.

 

 

What I am reading today

 

            National Geographic’s best photos of the decade.

            https://www.nationalgeographic.com/photography/best-pictures-the-decade-2010s/?cmpid=org=ngp::mc=crm-email::src=ngp::cmp=Editorial::add=reactivation&rid=7912D7310BBCEE9B958D4BEDCFEC5AE5

           

 

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The Morning Call---Nothing matters but intervention

 

The Morning Call

 

10/6/20

 

The Market

         

    Technical

 

            The Averages  (28148, 3408) pushed higher yesterday, maintaining the trend of new higher highs.  But that left the two gap up opens down below---which, as you know, I believe will have to be filled.  Plus, the VIX was once again up on a Market up day---a sign of elevated investor uncertainty.  Nonetheless, I still believe that the Market’s long term bias is to the upside and will remain so as long as investors buy into QEInfinity/Forever.

            https://thereformedbroker.com/2020/10/05/asymmetry/

 

Gold was up ½%, extending its bounce off its 100 DMA, though it is still within a short term trend of lower highs.  TLT got hammered (down 2%), making a huge gap down open joining the one created last Wednesday and finished very close to its 200 DMA (now support).  The dollar was also down big (1/2%), ending right on the developing trend of higher lows. 

 

            Judging by the dramatic moves in these indicators, it would appear the investor sentiment has shifted toward a stronger economy scenario.  Of course, this is just one day’s pin action, so follow through is needed before coming to a conclusion.  Still the media narrative of day focused (1) on fiscal stimulus before the election, (2) and after, doing a 180 on a Biden election [a massive spending programs] from being a negative to a positive.

            https://www.zerohedge.com/markets/wall-street-agrees-democratic-sweep-great-stocks

 

            Yields surge amid repricing on post-election reflation trade.

            https://www.zerohedge.com/markets/us-yields-surge-amid-sharp-repricing-post-election-reflation-trades

 

            The end of the dollar’s exorbitant privilege (must read).

                https://www.zerohedge.com/geopolitical/crash-looming-yale-senior-fellow-warns-end-dollars-exorbitant-privilege

 

                Monday in the charts.

            https://www.zerohedge.com/markets/stocks-gold-jump-bonds-dollar-dump-election-fears-fade

 

 

    Fundamental

 

       Headlines

 

              The Economy

 

                        US

 

Month to date retail chain store sales were flat with the prior week---which was an improvement.

 

The August trade balance was -$67.1 billion versus estimates of -$66.1 billion.

 

The final September services PMI was reported at 54.6, in line; the   composite PMI was 54.3 versus 54.4.

https://www.advisorperspectives.com/dshort/updates/2020/10/05/markit-services-pmi-new-business-growth-accelerates-to-fastest-since-march-2019

 

The September ISM nonmanufacturing index came in at 57.8 versus consensus of 56.9.

                          https://www.advisorperspectives.com/dshort/updates/2020/10/05/ism-services-continued-growth-in-september

 

                        International

 

August German factory orders rose 4.5% versus expectations of up 2.6%; its September construction PMI was 45.5 versus 50.0.

 

                          The September UK construction PMI was 56.3 versus forecasts of 54.0.

 

                        Other

 

                          Update on economic charts.

                          http://scottgrannis.blogspot.com/2020/10/top-charts.html

 

                          The depression may be over, but the recession has just begun.

                          https://www.nytimes.com/2020/10/03/upshot/pandemic-economy-recession.html

 

                          Service sector weighs on EU economy.

                          https://www.markiteconomics.com/Public/Home/PressRelease/559ad4d179154ed181fba2569d738e6d

 

                          House plan to breakup big tech leaks.

                         https://www.zerohedge.com/technology/house-democrats-game-plan-breaking-big-tech-leaks

               

                                 Saudi Arabia sees oil at $50/barrel till 2023.

                             https://www.zerohedge.com/commodities/saudi-arabia-sees-oil-50-until-2023

 

            The Fed

 

              How the Fed made the top 10% richer than ever.

              https://www.zerohedge.com/personal-finance/fed-study-how-we-made-top-10-richer-ever

 

            Fiscal Policy

 

              Both Biden and Trump ignore mounting federal debt.

              https://www.realclearmarkets.com/articles/2020/10/05/biden_and_trump_mistakenly_ignore_the_national_debt_579526.html

 

            The coronavirus

 

              The elusive ‘Covid party’ myth.

              https://www.aier.org/article/the-elusive-covid-party-myth/

 

              The coronavirus whistleblower’s mother purportedly arrested in China.

              https://www.zerohedge.com/geopolitical/covid-whistleblowers-mother-reportedly-arrested-china

 

            Bottom line.  Nothing matters but intervention.

              https://www.zerohedge.com/markets/nothing-matters-intervention-market-faces-multitude-binary-outcomes

 

              Here comes the ‘rate’ scare.

              https://www.zerohedge.com/markets/morgan-stanley-here-comes-rate-scare

 

              September dividends by the numbers.

              https://politicalcalculations.blogspot.com/2020/10/dividends-by-numbers-for-september-2020.html#.X3s2cmhKiM9

 

    News on Stocks in Our Portfolios

 

            Exxon and the future of fossil fuels.

            https://www.realclearmarkets.com/articles/2020/10/05/rhetoric_and_reality_with_exxon_bp_and_the_future_of_fossil_fuels_579528.html

 

What I am reading today

 

            Pointers from Portugal on addiction and the drug war.

            https://www.nytimes.com/2020/10/05/upshot/portugal-drug-legalization-treatment.html

 

 

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The Morning Call---It is all about the stimulus bill

 

The Morning Call

 

10/2/20

 

The Market

         

    Technical

 

The Averages  (27816, 3380) had a roller coaster day but ended to the upside, maintaining the trend of new higher highs.   At the moment, the only short term negative is those gap up opens down below, which, as you know, I believe will have to be filled.  Longer term, I still believe that the Market’s bias is to the upside and will remain so as long as investors buy into QEInfinity/Forever.

           

Historic pre-election sentiment.

            https://thereformedbroker.com/2020/10/01/wall-street-sentiment-into-elections/

 

Gold was up, extending its bounce off its 100 DMA, though it is still within a short term trend of lower highs.  TLT recovered from Wednesday whackage, but not enough to undo Wednesday’s technical damage. The dollar declined, but remained in a developing trend of higher lows. 

 

            Thursday in the charts.

            https://www.zerohedge.com/markets/copper-crude-crypto-credit-all-crumble-stimulus-hopes-fade

 

    Fundamental

 

       Headlines

 

              The Economy

 

                        US

 

                          August construction spending rose 1.4% versus estimates of +0.8%.

 

                          The September final manufacturing PMI was 53.2 versus consensus of                                             53.5.

                          https://www.advisorperspectives.com/dshort/updates/2020/10/01/markit-manufacturing-inches-up-in-september

 

The September ISM manufacturing index came in at 55.4 versus forecasts                 of 56.4

                                                https://www.advisorperspectives.com/dshort/updates/2020/10/01/ism-manufacturing-index-down-0-6-in-september

                                           

  September nonfarm payrolls increased by 661,000 jobs versus projections   of 850,000; the unemployment rate fell to 7.9% versus 8.2%.

                                               https://www.zerohedge.com/markets/us-unemployment-rate-unexpectedly-plunges-below-8-661k-jobs-added

 

                                           

                        International

 

  The August Japanese unemployment rate was 3.0%, in line;   September   consumer confidence was 32.7 versus 32.0.

                       

                          September EU flash CPI was 0.1%, in line.

 

                        Other

                       

                          August median household income.

                          https://politicalcalculations.blogspot.com/2020/10/median-household-income-in-august-2020.html#.X3YhXWhKiM8

 

                                                  Americans burned through savings in August.

                          https://www.zerohedge.com/markets/americans-burn-through-staggering-724bn-annualized-savings-august-stimulus-fades

                            

                          Hotel occupancy rates down 31.5% YoY.

                          https://www.calculatedriskblog.com/2020/10/hotels-occupancy-rate-declined-315-year.html

 

                          Why the real estate boom could last for years.

                          https://www.axios.com/real-estate-market-819e3c85-3765-4014-91c0-b545be6d5935.html

 

                          Small firm bankruptcies soar.

                          https://www.zerohedge.com/markets/small-firm-bust-accelerates-bankruptcies-soar-september

 

             The Fed

 

              Bring back Glass Steagall.

              https://thehill.com/opinion/finance/518803-to-restore-financial-stability-bring-back-glass-steagall

 

                  Fed policy and measuring inflation.

              https://www.advisorperspectives.com/dshort/updates/2020/10/01/cpi-and-pce-two-measures-of-inflation-and-fed-policy

 

            Fiscal Policy

 

              Federal spending will excess $6 trillion in FY2020.

              https://www.nextgov.com/cio-briefing/2020/09/federal-government-conclude-fiscal-2020-record-spending/168884/

 

                  Hopes for a stimulus bill wane.

              https://www.zerohedge.com/markets/house-democrats-pass-22-trillion-virus-relief-bill-crushing-hopes-compromise-stimulus

 

                Bottom line.  ‘long term the 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.’

 

 

    News on Stocks in Our Portfolios

 

 

What I am reading today

           

           

                               Crows possess higher intelligence long thought primarily human.

               https://www.statnews.com/2020/09/24/crows-possess-higher-intelligence-long-thought-primarily-human/

 

              Thoughts on the pussification of American youth. 

              https://www.zerohedge.com/political/smith-pussification-americas-youth-scientifically-engineered

 

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The Morning Call--An improving economy?

The Morning Call

 

10/1/20

 

The Market

         

    Technical

 

The Averages  (27781, 3363) rebounded yesterday, making new higher highs, though they closed well off their intraday high.  However, volume was up, breadth improved and the VIX was up (unusual for an up Market day).  At the moment, the only short term negative is those gap up opens down below, which, as you know, I believe will have to be filled.  Longer term, I still believe that the Market’s bias is to the upside and will remain so as long as investors buy into QEInfinity/Forever.

           

Gold was down but remains strong long term while experiencing short term weakness.  TLT was hammered down 1%, ending below its 100 DMA (now resistance) and breaking its trend of higher lows. The dollar was unchanged, remaining in a developing trend of higher lows.  The pin action of all these indicators along with stocks came into sync hinting at an improving economy.

 

            Wednesday in the charts.

            https://www.zerohedge.com/markets/stocks-suffer-worst-september-2011-dollar-election-doubt-soars

 

    Fundamental

 

       Headlines

 

              The Economy

 

                        US

 

                          Weekly jobless claims rose 837,000 versus expectations of 850,000.

                          https://www.zerohedge.com/personal-finance/over-830000-americans-filed-first-time-jobless-benefits-last-week

 

August personal income fell 2.7% versus projections of -2.4%; personal spending rose 1.0% versus +0.8%; the PCE price index was +0.3% versus +0.2%; core PCE index was +0.3%, in line.

                          https://www.zerohedge.com/markets/us-personal-income-tumbles-august-savings-rate-plunges

 

                          August pending home sales rose 8.8% versus consensus of +3.4%.

                          https://www.advisorperspectives.com/dshort/updates/2020/09/30/pending-home-sales-at-record-high-in-august

 

                          The September Chicago PMI came in at 62.4 versus forecasts of 52.0.

                          https://www.advisorperspectives.com/dshort/updates/2020/09/30/chicago-pmi-surges-in-september

 

                        International

 

August EU unemployment  was 8.1%, in line; August PPI was +0.1%, also in line; the September final manufacturing PMI was 53.7, also in line.

 

The September final German manufacturing PMI was 56.4 versus estimates of 56.6.

 

The September final Japanese manufacturing PMI was 47.7 versus projections of 47.3; the Q3 large manufacturers index was -27 versus -23; the small manufacturers index was -44 versus -38; the large nonmanufacturers index was -12 versus -9; the all industry cap ex was up 1.4% versus +1.3%.

 

                        Other

 

                          Retail on course for most bankruptcies and store closures in a single year.

                          https://www.zerohedge.com/markets/retail-pace-most-bankruptcies-and-store-closures-ever-one-year-bdo

 

                                  In latest Brexit news, EU files suit against UK.

                          https://www.zerohedge.com/geopolitical/eu-launches-legal-proceedings-over-uk-intermarket-bill-brexit-talks-enter-final-round

 

            The Fed

 

              ECB is considering employing the Fed’s new ‘average inflation’ policy.

              https://www.bloomberg.com/news/articles/2020-09-30/ecb-to-consider-allowing-inflation-to-overshoot-lagarde-says?sref=loFkkPMQ

 

Fed extends limits on bank stock buybacks and dividends.  See they can so   something right.

              https://www.zerohedge.com/markets/fed-extends-limits-buybacks-dividends-until-end-2020-brainard-dissents

 

            The coronavirus

 

              Overnight update.

              https://www.zerohedge.com/geopolitical/who-begs-billions-support-global-covid-19-vaccinations-israel-sees-another-daily

 

            China

 

              The July US balance of trade with China got worse.

              http://econbrowser.com/archives/2020/09/the-july-trade-release

 

 

    News on Stocks in Our Portfolios

 

 

 

What I am reading today

 

            Uncovering the mysteries of America’s first English colony.

            https://www.nationalgeographic.com/magazine/2018/06/lost-colony-roanoke-history-theories-croatoan/?cmpid=org=ngp::mc=crm-email::src=ngp::cmp=editorial::add=SpecialEdition_Escape_20200923&rid=7912D7310BBCEE9B958D4BEDCFEC5AE5

 

 

                        Another life lesson from Traderfeed.

            http://traderfeed.blogspot.com/2020/09/why-youre-having-trouble-getting-to.html

 

                        Getting a social security ‘do over’.

            https://www.usatoday.com/story/money/2020/09/29/social-security-took-checks-early-because-covid-you-get-do-over/3567304001/

 

                        US funds foreign protests.

            https://www.zerohedge.com/geopolitical/congressional-hearing-reveals-us-govts-invisible-hand-protests-around-world

 

Reader alert.  This is a political statement---read at your own risk.  This is a perfect example of what is wrong with this country.

            https://www.zerohedge.com/political/university-sets-support-spaces-students-traumatized-presidential-debate

 

 

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