The Morning Call
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.
And the latest auction (short):
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.
Yesterday in the charts.
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.
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):
Buybacks. The next $1 trillion milestone (short):
News on Stocks in Our Portfolios
Emerson Electric (NYSE:EMR) declares $0.485/share quarterly dividend, in line with previous.
This Week’s Data
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.
Weekly mortgage applications fell 3.0% while purchase applications were down 2.0%.
Revisions in US economic data are upbeat (medium and a must read):
US heavy truck sales up year over year (short):
What I am reading today
Some history on Gen. Nathanael Greene (medium):
Overcoming confirmation bias (medium):
The Rosetta image of its target comet (medium):
This is what our colleges are turning out (medium):
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Disclosure: I am/we are long EMR.