Tuesday, March 1, 2016

The Morning Call--The G20 does diddily

The Morning Call


The Market

The indices (DJIA 16516, S&P 1932) sold off from an extended overbought position on higher volume and mixed breadth. 

The VIX was up 3.75%, ending back above the lower boundary of a very short term uptrend which was confirmed as broken on Friday under our price and distance discipline.  I am holding off making a call on the trend until there is further follow through in either direction.

The Dow closed [a] below its 100 day moving average, now resistance, [b] below its 200 day moving average, now resistance, [c] below the lower boundary of a short term downtrend {16725-17471}, [c] in an intermediate term trading range {15842-18295}, [d] in a long term uptrend {5471-19343}, [e] and while it made a second higher high last week, it finished back at the level of its last lower high.

The S&P ended [a] below its 100 day moving average, now resistance, [b] below its 200 day moving average, now resistance [c] within a short term downtrend {1872-1957}, [d] in an intermediate term trading range {1867-2134}, [e] in a long term uptrend {800-2161} and [f] like the Dow closed back at the level of its last lower high, having made a one day higher high on last Thursday.

            Bearish crossover (short):

The long Treasury was up.  It finished below the lower boundary of its very short term uptrend for a second day, confirming the break of that trend.  Nonetheless, it remains firmly within a short term uptrend and above its 100 day moving average. 

GLD rose 1.3%, ending in very short term and short term uptrends, as well as substantially above its 100 moving average. 

Bottom line: yesterday’s pin action didn’t do a lot to clear up (for me) any of the confusion that was generated last week.  The technical factors continue mixed; and the only thing that will cure that is a big directional move.  So short term, I am convictionless.  Though longer term, I believe that [a] we will not see a new all-time high and [b] we haven’t seen the lows of this cycle yet.



The US economic stats got off to a rough start: the February Chicago PMI, January pending home sales and the February Dallas Fed manufacturing index were all really bad---sort of dampens the positive showing of last weeks’ primary indicators.

Overseas, the important set of news was (1) G20 did little but give lip service to the IMF’s recent admonishment for new fiscal policy measures to improve global growth; and before the ink was dry on the G20 communique, (2) Japan voiced its determination to raise its national sales tax to 10% [how’s that for stimulative fiscal policy] and (3) China eased its bank reserve requirements [having just promised to stabilize the yuan right before the G20 meeting]. 

At the risk of stating the obvious, in less than 24 hours of the close of the G20 of the four major global economies [US, EU, Japan, China], 50% of them announced the continuation of the same tired old policies that have driven the world into the malaise that it currently finds itself.  Unfortunately, the other 50% are most likely to follow suit---the US, which will almost certainly be unable to attempt any fiscal policy moves until at least mid-2017 and the EU, in which the PIIGS can’t enact fiscal stimulus due to debt covenants and the German’s won’t.

            That is not to say that the ECB and/or the Fed won’t pursue more QE/negative interest policies.  But do I need to repeat that that is what got the US/global economy in the mess they are currently in?   I am sure that the QEInfinity devotees will be tickled pink with more dovish moves by the central banks---at least in the beginning.  But sooner or later, the tide goes out; and when it does, there will be a lot of white flounders running for cover.

            In other news, EU February CPI was reported at -0.2%, ex food and energy -0.7%.

Bottom line:  the economic stats resumed their dismal performance and the G20 delivered diddly.  Indeed, immediately following the meeting, two prominent members proved just how hollow all the central bank rhetoric is by doing the exact opposite of the recommended policy moves---which is to say more of the same senseless, central bank hubris that led to the current global economic malaise. 

Until these guys get hit between the eyes with a two by four, economic conditions will not likely improve and could very well get worse.

‘But given the past relationship between QEInfinity and investor jigginess, hope will likely continue to spring eternal.   If it does, it makes sense to use any rebound to take some profits in winners that have held up during recent decline.’

       Investing for Survival
            Common mistakes most investors make.

    News on Stocks in Our Portfolios
Medtronic (NYSE:MDT): FQ3 EPS of $1.06 in-line.
Revenue of $6.93B (+60.4% Y/Y) misses by $60M

Donaldson (NYSE:DCI): FQ2 EPS of $0.29 misses by $0.05.
Revenue of $517.2M (-12.1% Y/Y) misses by $17.49M

Bank of Nova Scotia (NYSE:BNS): FQ1 EPS of C$1.43 beats by C$0.01.
Revenue of C$6.37B (+8.7% Y/Y) beats by C$100M.

Bank of Nova Scotia (NYSE:BNS) declares C$0.72/share quarterly dividend, 2.9% increase from prior dividend of $0.70.
Forward yield 5.33%
Payable April 27; for shareholders of record April 5; ex-div April 1


   This Week’s Data

            The February Chicago PMI came in at 47.6 versus expectations of 52.9.

            January pending home sales declined 2.5% versus estimates of a 0.5% increase.

            The February Dallas Fed manufacturing index was reported at -31.8 versus forecasts of -30.0.


            Don’t dismiss deflation (medium):

            A world deep in debt (medium):

            2% growth and future prosperity (medium):

            Has an oil price ceiling been set (medium)?



  International War Against Radical Islam

No comments:

Post a Comment