Monday Morning Chartology
The Morning Call
9/28/20
The Market
Technical
On Friday, the S&P nicely followed Thursday’s bounce, leaving it above its 100 (and 200) DMA---which is the good news. The bad news is that it has already reset its short term trend to a trading range. Plus, the Thursday/Friday rebound did not break the trend of lower highs and lower lows. If it can hold its 100 DMA, then this recent downtrend would just be part of a consolidation phase. If not, then expect more downside, though it would have to fight its way through multiple support levels for that downside to really be meaningful.
The Market’s momentum has turned negative.
The Stock Market's Momentum Has Turned Negative
The long bond has struggled to break out of a pennant formation and the challenge its 100 DMA (now resistance). While ostensibly successful, the results so far are not awe inspiring. So, I need more upside follow through to be convinced the prices are headed up (rates down).
Gold had a terrible week, breaking below minor support and sustaining a trend of lower highs and lower lows. That said, it remains in uptrends across all time frames and above both DMA’s. However, it is poised to challenge its 100 DMA, a break of which would fuel more downside momentum. But for the moment, the worst that can be said is that it is consolidating.
The dollar has successfully challenged its short term downtrend and reset to a trading range. However, before getting jiggy about a change in momentum, it still has to overcome resistance in the form of its 100 and 200 DMA’s. Were that to occur, it would insinuate either a stronger economy or a flight to safety. At the moment, the long bond is supporting the ‘flight to safety’ alternative while gold and stocks are hinting at the possibility. So, we need more time and distance to really draw any conclusions about the message.
I cannot derive a lot of information value from the VIX chart. It has see sawed around both DMA’s and it can’t sustain a directional trend, although it does remain at an elevated level relative to stocks---which indicates heightened uncertainty/anxiety. That suggests an inclination to a ‘flight to safety’.
Friday in the charts.
Dow Suffers Worst Week Since June As Dollar Surges Most In Six Months
Fundamental
Headlines
The Economy
Last Week in Review
The stats last week were slightly positive but the primary indicators were mixed. This adds more evidence to the notion that the economy is improving but not likely in ‘V’ shape that is hoped for. Overseas, the indicators were overwhelmingly negative---which continues the pattern of irregular growth. I think that unfortunately their sluggish performance will serve to restrain our own growth.
Whatever the shape of the recovery, I am not altering my belief that long term the economy will grow at a historically subpar secular rate due to the twin burdens of egregiously irresponsible fiscal and monetary policies---which, by the way, are becoming even more egregiously irresponsible as a result of measures being taken by the government and the Fed in dealing with the current crisis.
Why the U.S. Risks Repeating 2009's Economic Stimulus Mistakes
US
International
Other
The election
Investors are starting to freak out about the outcome of the 2020 election.
Why stock-market investors are starting to freak out about the 2020 election
The coronavirus
Overnight update.
German minister warns lockdowns will cause more deaths that the virus.
German Minister Admits Lockdown Will Kill More Than COVID-19 Does
Breakthrough research on coronavirus.
Breakthrough Research On Severe COVID-19 Infections Opens Door To New Treatment
China
China’s second largest property development company in financial trouble.
Bottom line. The economic recovery story is as fake as ever.
The Economic Recovery Story Is As Fake As Ever
News on Stocks in Our Portfolios
AT&T (NYSE:T) declares $0.52/share quarterly dividend, in line with previous.
What I am reading today
Art looted 123 years ago.
This Art Was Looted 123 Years Ago. Will It Ever Be Returned?
Quote of the day.
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