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The Morning Call---The Data Flow Isn't Improving; Neither Is Trump's Credibility

The Morning Call


The Market


The Averages (26118, 2906) had a rough day, bouncing down off the upper boundaries of the August 5th trading range (for the third time) and ending back below their 100 DMA’s, voiding last Thursday’s break. Volume was up fractionally; but breadth deteriorated. The good news is that they are above their 200 DMA and in uptrends across all timeframes. Near term, I think the most important technical factor to watch is how the August 5th trading range gets resolved.

The VIX rose 3 ½ %, somewhat less than I expected on a 285 point down day in the Dow. It remains above both MA’s, giving a negative bias to stock prices.

The long bond fell just seven cents; so, it maintained its strong upward momentum. It is above both MA’s, in uptrends across all time frames. Its pin action suggests that bond investors are worried about something.

Does this look like risk aversion?

The yield curve inversion and stocks.

The dollar was up ¼ % (again) on heavy volume, finishing above both MA’s and in short and long term uptrends. Together with TLT and GLD, it indicates a high level of anxiety.

GLD rose 1 3/8 %, recovering the loses that it sustained last week and ending above both MA’s and in very short term and short term uptrends.

Bottom line: long term, the Averages are in uptrends across all timeframes; so, the assumption is that they will continue to advance. Short term, they failed to break above their 100 DMA’s and the upper boundary of their August 5th trading range. How those trading ranges are resolved will determine their near term direction.

The pin action of long bond, the dollar and gold continues to point at the need for a safety trade.

Tuesday in the charts.

SocGen’s news flow indicator turned negative.



The economic stat releases yesterday were negative: July construction spending and the August ISM manufacturing index were disappointing, though the August manufacturing PMI was a plus.

The probability of a recession by August 2020.

UBS slashes GDP forecast.

Overseas, the August German and UK manufacturing PMI’s were below expectations while the August EU manufacturing PMI and the July EU PPI were in line.

No other fresh news.

***overnight, Johnson calls for snap UK elections.

And Hong Kong withdraws extradition bill.

Hong Kong's Lam Unexpectedly Withdraws Hated Extradition Bill; Stocks Soar

Bottom line: the economic dataflow isn’t improving and, as indicated in the above links, an increasing number of firms are revising downward their expectations for economic growth---coming more in line with my own forecast. To be clear, I still don’t think the US will experience a recession or if it does, it will be a mild one. That said, if the corporate profit estimates began declining along with the GDP expectations, that is apt to have a Market impact. In the meantime, trade and the Fed will likely continue to determine stock prices.; though I would observe that at some point the Market will cease to believe any of Trump’s tweets/claims.

Just How Long Will Markets Keep "Buying" It?

A look at corporate profits from my favorite optimist.

Another look at corporate profits

Expectations for dividend growth.

Political Calculations: Changing Expectations for S&P 500 Dividends in 2020-Q1

Update on equity valuations.

Is the Stock Market Cheap?

The economic future of negative interest rates (must read):

The Economic Future Of A Negative Interest Rate World

News on Stocks in Our Portfolios


This Week’s Data


The August final manufacturing PMI was 50.3 versus consensus of 49.9.

Markit Manufacturing: "Manufacturing PMI lowest for almost a decade as export decline intensifies"

The August ISM manufacturing index was 49.6 versus estimates of 51.1

ISM Manufacturing Index: Down in August

July construction spending rose 0.1% versus forecasts of up 0.3%

Construction Spending Increased Slightly in July, Down 2.7% YoY

Weekly mortgage applications fell 3.1% but purchase applications were up 3.6%.

The July trade deficit was $54.0 billion versus expectations of $53.5 billion.


The August Chinese Caixin manufacturing PMI was 50.4 versus expectations of 49.8; the services PMI was 52.1 versus 52.0; the composite PMI was 51.6 versus 51.1.

The August EU services PMI came in at 63.5 versus projections of 53.4; the composite PMI was 51.9 versus 51.8; July retail sales were down 0.6%, in line.

The August German services PMI was reported at 54.8 versus consensus of 54.4; the composite PMI was 51.7 versus 51.4.


The increasing inequality in CEO/worker compensation.

CEO Compensation Increased 940% Between 1978 and 2018, Workers' Only by 12% | naked capitalism

Framing lumber prices down 205 YoY.

Update: Framing Lumber Prices Down 20% Year-over-year

The dangers of the Fed’s superman complex.

Debt, Deflation, & The Dangers Of The Fed's "Superman" Complex

Why central banks may be hurting rather than helping.

Why Central Bankers May Be Hurting, Rather Than Helping, Lenders

Emerging markets central bankers are cutting rates.

Emerging Market Central Banks Panic With Most Rate Cuts Since Financial Crisis

What I am reading today

Avoiding post vacation blues.

Ever had the post-vacation blues? Here's how to avoid them.

State Pension Funds Keep Increasing Debt

Asset Backward

Iran threatens to up the ante.

Rouhani Vows To Further Breach Nuclear Limits As US Sanctions Iran's Space Agency

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