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Things to know

  • UK Elects Boris Johnson
  • ECB rate cut to be     announced Thursday
  • Earnings continue to     beat
  • UK and Iran Tensions     increase

  The clock ticks…….on the UK (think new Prime Minister), on The Debt Ceiling (think increase), on the ECB (think further stimulus), on the FED (think rate cut), on Iran (think state piracy), on oil (think rising tensions in the Strait of Hormuz)  , all while earnings continue to surprise on the upside….stocks continue to churn and this week they appear to be churning higher (although still well within the range that we outlined 2 weeks ago) … investors/traders and algo’s seem to be ignoring all of the ‘other stuff’ that is happening around the world. 

 It is a big week for stocks and earnings, it is also a big week for eco data – data that may point to a strong, robust US economy all while they tell us that we need a rate cut.  Eco data this week includes Existing home sales (remember last week housing starts and building permits disappointed), Markit Manf PMI, Markit Services PMI,  (both expected to be north of 51 (expansionary), new home sales, durable goods, wholesale inventories, retail inventories, Richmond and Kansas City Fed Surveys and on Friday we get  2Q GDP – and here the expectation is +1.8% – which is down from 3.1% in the 1Q – but this is no surprise at all….part of it is seasonal and part of it is just a reversion to the mean – remember – this reading gets revised 3 times – so hold on….

 Stocks inched higher on Monday to start the week as we got ready for the onslaught of data……trading in a tight range really as investors assess the next longer term move.  Will it be up from here or will the mkts take a break?   Look, while we are trading near the all time highs and earnings have been ‘better than expected’ for more than 78% of reported companies – we will need to see even more improvement in earnings and guidance to really justify another surge in valuations from here especially if all of this talk of a coming recession continues to dominate the conversation.   The ECB and the FED are both due to make announcements…the ECB on Thursday and all expectations are for Uncle Mario (Draghi) to offer up new stimulus (think a 10 bps cut)  – now whether he does it on Thursday or pushes it off until September is the question – but  with the FED ready to announce a 25 bps cut next week – it would surprise me if Draghi does not make the announcement – I mean it’s Europe that everyone is concerned about – so why would we announce a cut while the ECB remains on hold?  It doesn’t make sense –

 And the next thing that we need to listen for is the extent of the cuts that Powell announces…there is some speculation that he will cut now and indicate another 2 cuts this year (while there are some that think we will get 3 more cuts this year) ……and that, my friends is the issue.  If he announces 2 MORE cuts doesn’t that scream of concern?  I mean again, rates are not high by any stretch and 3 – 25 bps rate cuts would take US interest rates back to 1.75% at a time when nearly every macro data point is signaling growth… WHAT are we doing?  In my opinion – this one cut is all it should be (and I’m still in the camp that we don’t need one at all), but I’m out voted… let’s see.  Let’s remember – lower rates will continue to create asset bubbles – lower rates will force valuations higher, lower rates will force money into the mkt as investors search for yield. 

 So here is the technical view…..if you draw a line from the highs of September 2018 across to today…you will find that 2942 is the trendline and while that is above the 50, 100 and 200 dma’s it is a significant level.  If we see the mkt back off and test this level in the next move – you will want it to hold….if it fails then that changes the technical narrative.  And we are coming into a volatile time of the year….September – December….recall what happened last October-December when rates were 2.25% and the FED pushed them to 2.5% – a mere 25 bps move in rates caused a swift and violent 20% selloff in the mkt – with the typical highflyers taking the biggest beating….so the challenge is – what are the correct rates in this environment?  What are the correct rates when unemployment is at all time lows, wages are rising, manufacturing is improving, PPI and CPI holding steady just shy of 2%, and GDP annualized is hovering at 3%…..and the list goes on….

 To put it in perspective – even a move to the 200 dma at 2782 is only a 7% move from here….well within ‘normal’ – just sayin……

 So it is 7 am and the UK is about to announce the name of the new PM – all money is on Boris Johnson…..recall that he is calling for a UK BREXIT by October 31st – no more negotiating as he seeks to appease the ‘anti – EU’ hardliners…..…..(or so he says).  European stocks are trading higher right now as earnings and the ECB rate cut are the story…..FTSE + 0.60%, CAC 40 + 0.69%, DAX + 1.48%, EUROSTOXX +1%, SPAIN +1% and ITALY +0.77%,

 US futs are UP…….on better earnings from KO ( a Dow stock) and expectations of better earnings from a host of others…..Stimulus from the ECB and the FED continue to put a floor under the mkt all while the geo-political news simmers in the background….(Think UK response to Iran piracy and the new UK PM).

 Dow futs are up 100 pts, the S&P is ahead by 10, the Nasdaq is up by 30 and the Russell is pointing up 5.  With all that being said – the S&P will once again just kiss 3000 if the strength holds….leaving us well within the 2975/3015 range.  So for all of the hoopla – the mkt has not really gone anywhere in the last two weeks…..even with all of the better than expected data…and the UK just announces the new PM – Boris Johnson…and he combed his hair…that has to be a good sign….. (Theresa May is now in the history books…..)

 Oil – continues to be under pressure – even in light of rising tensions in the Strait of Hormuz…..which speaks to the fact that no one appears to be worried that this issue will disrupt supply…..Unless this spins out of control, it appears that demand is fine and supply is even better…the US is a net exporter of oil and while this situation would have caused a spike in oil 2 or 3 yrs ago – times have changed.  Now if military action becomes the default then I think oil spikes but let see. 

 Take good care.


 Jack Daniels Chicken Thighs

 You will need:  Chicken Thighs (I prefer on the bone) but you can use boneless.  brushed lightly with peanut oil and seasoned with s&p.

 For the Sauce – mix:  ½ c of soy sauce, 4 tablespoons vinegar, ½ c of Jack (Daniels), ½ c of brown sugar, 3 scallions, grated ginger – like a tblspn, 4 garlic cloves – smashed and chopped.  Chop the scallions and mix all of the sauce ingredients together and set aside.  Taste – make any small adjustments.  

 If you do this on the grill then – heat the grill to high…..add chicken – careful not to burn – cook about 4 mins on each side – or until lightly browned – not burned….remove and place in a metal roasting pan.

 Turn heat down to low.   Add the sauce to the pan and return to the grill (leaving the chicken in the pan on the grill – capisce?)  – stirring to coat the chicken pieces well. Continue to cook until the sauce is reduced to all but a glaze on the chicken.  Remove and serve.

 If you are doing this in the house – then heat a sauté pan to high with a bit of the peanut oil and add chicken pieces cook until lightly browned.  Reduce heat and add the sauce.  Cook uncovered until only a glaze is left….serve immediately.