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The Morning Call--ZZZZZTeslaZZZZZ

|Includes: Emerson Electric Co. (EMR)

The Morning Call

8/8/18

The Market

Technical

The Averages (DJIA 25628, S&P 2858) had another good day but, again, on lower volume. Breadth improved. They remain strong technically and the Dow is back above its June high. However, its 100 DMA is right on its 200 DMA and moving lower. In addition, the VIX broke below the lower boundary of its short term trading range---a plus for stocks (if it remains there through the close on Thursday, it will reset to a downtrend).

The major technical story continues to be the pin action of TLT (increase in interest rates). Yesterday, it once again fell below its 100 DMA and the lower boundary of its long term uptrend. That restarts our time and distance clock. If it remains below its 100 DMA (now support) though the close today, it will revert to resistance and below the lower boundary of its long term uptrend through the close on Friday, it will reset to a trading range.

Technically Speaking: Are Bonds Sending A Signal?

And the latest auction (short):

3Y Note Yields Most Since May 2007 In Ugly, Tailing Auction As Foreign Buyers Flee

The dollar fell three cents but remains in a strong technical position and appears to be confirming a move to higher rates. GLD was up but is in a solid downtrend which also points towards higher rates.

Bottom line: the Averages remain quite strong technically speaking. The assumption remains that they are going to challenge their all-time highs with the S&P only points away.

TLT’s resumed its challenge of both the 100 DMA and, far more importantly, the lower boundary of its long term uptrend. If successful, its pin action has potentially important negative fundamental as well as technical implications. The dollar and GLD are pointing towards higher interest rates.

It's Not Trade War Or A Market Drop That Is Keeping Credit Investors Up At Night

Yesterday in the charts.

Global Stocks Pop, Bonds Drop As PBOC Slows Great Fall Of China

Fundamental

Headlines

Two datapoints were released yesterday: month to date retail chain store sales improved over the prior week while June consumer credit growth was well below estimates.

***overnight, China readies tariffs on $16 billion US goods. It also reported July exports and imports were both above forecasts.

Futures Slide, Erase Overnight Gains As China Readies $16 Billion Retaliatory Tariffs

Other than that, the only headline grabbing news of the day was Elan Musk’s statement that he might take Tesla private.

Bottom line: as I noted yesterday, given the upward bias in investor sentiment, a slow news week will likely mean higher prices. The Tesla announcement only adds too investor elation.

That said, the higher stock prices go, the more overvalued they become. Cash is an important asset to own in this environment.

As of the close last night, 79% of S&P companies have beat earnings expectations.

What you pay for a stock matters (medium):

Smoked in 1999 or Vaped in 2018 What You Pay Buying Shares Matters - Smead Capital Management - Commentaries - Advisor Perspectives

Buybacks. The next $1 trillion milestone (short):

The Stock Market's Next $1 Trillion Milestone: Buybacks

News on Stocks in Our Portfolios

Emerson Electric (NYSE:EMR) declares $0.485/share quarterly dividend, in line with previous.

Economics

This Week’s Data

US

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

June consumer credit rose $10.2 billion versus forecasts of up $16.0 billion.

US Credit Card Debt Shrinks For Only Second Time Since 2013 As Student, Auto Loans Hit All Time High

Weekly mortgage applications fell 3.0% while purchase applications were down 2.0%.

International

Other

Revisions in US economic data are upbeat (medium and a must read):

When Economic History Improves With Time | by Carmen M. Reinhart & Vincent Reinhart

US heavy truck sales up year over year (short):

U.S. Heavy Truck Sales up 13% Year-over-year in July

What I am reading today

Some history on Gen. Nathanael Greene (medium):

Revolutionary War - Gen. Nathanael Greene

Overcoming confirmation bias (medium):

Data-Driven? Think again - Hacker Noon

The Rosetta image of its target comet (medium):

The Rosetta image archive of its target comet is now complete. Wanna peruse 100k images of an alien world?

This is what our colleges are turning out (medium):

Watch: Millennials Try To Explain The First Amendment

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Disclosure: I am/we are long EMR.