The Morning Call---Bad News Is Irrelevant
Value, Growth At A Reasonable Price, Dividend Investing
Seeking Alpha Analyst Since 2010
The Morning Call
7/1/20
The Market
Technical
The Averages (25812, 3100) kept the rally going. Volume remained weak; but breadth did improve. (1) the indices remained out of sync on their 200 DMA’s [Dow below, S&P above], (2) the Dow ended above the upper boundary of its very short term downtrend; if it remains there through the close today, it will void that trend. However, the S&P finished below its comparable trend. So, the Averages are now out of sync on two resistance/support levels. As I have noted previously, stocks will be directionless until those inconsistencies are corrected and (3) they still have those ‘island tops’ weighing on them.
An overbought and volatile combination
The short term the technical picture remains shaky; and the indices are stuck in a narrow trading range marked by the upper boundary of their very short term downtrend (on the upside) and their DMA’s (on the downside). Nonetheless, I am sticking with my assumption that the Market’s bias is to the upside---at least until/unless the Averages revert their DMA’s to resistance.
Gold was up, setting another new seven year high. The long bond was down slightly but that did not negate its reset to the upside. The dollar was also down. It continues unable to make a second higher high.
Falling Real Yields Suggest Gold Price Will Continue To Rise
Tuesday in the charts.
Dow Soars To Best Quarter Since '87 As Fed Balance Sheet Explodes
Fundamental
Headlines
The economy
Yesterday’s stats were mostly upbeat. Month to date retail chain store sales, the April Case Shiller home price index and June consumer confidence were better than anticipated while the June Chicago PMI came in below estimates.
Overseas, the numbers were mixed. On the plus side, May Japanese housing starts and construction orders and May Chinese manufacturing and nonmanufacturing PMI’s were above expectations. Negatively, May Japanese unemployment and industrial production along with final Q1 UK GDP growth and business investment were below forecasts.
The Fed
The Fed is now a large holder of US bond ETF’s.
The Fed Is Now A Top 5 Holder Of The Biggest Corporate Bond ETFs
The coronavirus
The latest media scare story.
The next six days will be crucial.
Coronavirus Cases Vs Fatalities: "Why The Next 6 Days Will Be Crucial"
Lives versus jobs.
Should Governments Save Lives Or Jobs Amid Pandemic?
China
China ends ‘one state, two systems’.
Bottom line. QEInfinity/Forever is with us for as far as the eye can see. So far, events related to the coronavirus, the riots and the India/China confrontation have proven irrelevant to stock prices. Until that changes, valuations will get richer.
The necessity of enduring volatility.
News on Stocks in Our Portfolios
General Mills (NYSE:GIS) declares $0.49/snare quarterly dividend, in line with previous.
Economics
This Week’s Data
US
Weekly mortgage applications fell 1.8% while purchase applications were down 1.3%.
The April Case Shiller home price index rose 0.9% versus estimates of +0.4%.
S&P/Case-Shiller Home Price Index: April Update
The June Chicago PMI came in at 36.6 versus expectations of 45.0.
June consumer confidence was reported at 98.1 versus consensus of 91.8.
Consumer Confidence Up in June
The June ADP private payroll reports showed job increases of 2,369,000 versus forecasts of 3,000,000. However, the big number was the May revision from a loss of 2,800,000 jobs to a gain of 3,065,000.
After Massive Upward Revision, ADP Employment Data Shows Job Rebound Slowing In June
International
May German retail sales rose 13.9% versus predictions of 3.9%; its June unemployment rate was 6.4% versus 6.6%.
The final June Japanese manufacturing PMI was reported at 40.1 versus projections of 37.8; the German PMI was 45.2 versus 44.6; the EU PMI was 47.4 versus 46.9; the UK PMI was 50.1, in line.
June Japanese consumer confidence was 28.4 versus estimates of 30.0.
Other
Median household income in May.
Political Calculations: Median Household Income in May 2020
What I am reading today
How to live in a world gone mad?
How to Live in a World Gone Mad? - Marginal REVOLUTION
Enough is enough. What are you going to do about it?
Voting Isn't Enough to Combat the Woke Left - American Greatness
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Analyst's Disclosure: I am/we are long GIS.
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