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Looking For A Clickbait Way Of Saying 'Consolidation' (Technically Speaking For 6/2)

Jun. 02, 2020 5:53 PM ETSPY, IWM, QQQ, IEF9 Comments
Hale Stewart profile picture
Hale Stewart


  • The latest ISM report showed that US manufacturing is still in a deep contraction.
  • Consumers are very cautious about getting back out.
  • The markets are consolidating in several time frames.

The latest ISM report still shows a contraction in manufacturing activity. The index rose from 41.5 to 43.1. Only 6 of 18 industries were expanding. New orders, production, and employment indexes all rose but are still in the lower 30s. The anecdotal comments show a clear split. Let's start with the negative comments (emphasis added):

  • “Current conditions in the automotive, construction, oil and gas, agriculture equipment, and tube/pipe markets are all adversely impacting our business results.” (Chemical Products)
  • We see an issue with suppliers that are affecting production. At the same time, social distancing measures in [the] manufacturing plant and customer demand are impacting the rate of production.” (Transportation Equipment)
  • Getting out from under several suppliers being closed worldwide. Also, looking at what really needs to be in China.” (Machinery)

There were, however, some "green shoots:"

  • We see a lot of positive signs, despite what's going on. People seem to continue to be building and looking to projects for fall of 2020 and beyond. There is good optimism out there.” (Nonmetallic Mineral Products)
  • Fuel sales demand are beginning to rebound in May as stay-at-home orders are lifted across the country.” (Petroleum & Coal Products)
  • Despite the COVID-19 issues, we are seeing an increase of quoting activity. This has not turned into orders yet, but it is a positive sign.” (Computer & Electronic Products)

At the current pace, expect this data to be negative for at least a few more months, maybe longer.

The RBA kept Australian rates at 25 basis points. Since Australia is more trade-dependent, the bank's observations about the international environment carry a bit more weight.

The global economy is experiencing a severe downturn as countries seek to contain the coronavirus. Many people have lost their jobs and there has been a sharp rise in unemployment.

This article was written by

Hale Stewart profile picture
Hale Stewart spent 5 years as a bond broker in the late 1990s before returning to law school in the early 2000s. He is currently a tax lawyer in Houston, Texas. He has an LLM in domestic and international taxation (MagnaCumLaude). He is the author of the book The Lifetime Income Security Solution. Follow me on Twitter at @originalbonddadYou can read his legal analysis on his law office's blog.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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Comments (9)

03 Jun. 2020
Why still bearish every day, simply ignoring the fact that the market is going to new heights every day? Don't miss the rally as long as it lasts :-)
Because some people find it difficult to not make logical deductions. You may feel that everything is and will be fine on the way down after you've jumped off the roof of a building, but your optimism would be unfounded. The stock market may only be loosely connected to realities of the national and global economies, but ultimately those realities seep into the psyches of all but the most deluded investors.
You could quote the band Stealers Wheel and use their lyric, "Here I am, stuck in the middle with you."
Main_Street profile picture
Who needs trading desks when we have algos?
6264541 profile picture
What is the bottom plot on the spy and iwm charts?
6264541 profile picture
I mean the plot below volume on spy labelled between 0.5 and 4.0 on the right hand side.
Chris Valley profile picture
moving average convergence divergence.
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