Thursday, April 14, 2016

The (short) Morning Call--Everything is coming up roses, except everything else

The Morning Call


The Market

            Both indices (DJIA 17908, S&P 2082) closed above the upper boundaries of their short term trading ranges; if they finish there through the close on Friday, the short term will reset to uptrends.  As has been the case for the last month, volume was low.   Still price is truth and the truth is that the Averages are challenging their short term trading ranges on decent breadth.  The bulls now control the field; however, prices are still in a very congested area.  So I am sticking with the scenario that the indices will challenge their all-time highs and fail.



            Yesterday’s economic numbers were awful: March retail sales (primary indicator) were weak, March PPI was negative and business sales sucked.  OPEC continued the Doha green apple two step. 

There was some positive trade stats out of China; but that got mixed analysis as a result of seasonal bias as well as the Chinese habit of masking capital flows via fraudulent invoicing.   Nonetheless, the data out of China has been decent this week, giving investors hope that economic conditions there may not be as bad as many feared  (caveat: they lie a lot). 

On the other hand,

(1) overnight, China devalued the yuan by the most in three months,

(2) Singapore, which is a proxy for global trade, eased key interest rates.

Finally, the latest Fed Beige Book read like a Mother Goose fairy tale: consumer spending, construction activity and industrial production are all improving while inflation is subdued except for some areas of wage inflation.  Correct me if I am wrong, but doesn’t this read like the preamble to a rate hike?
            Plus, the Fed held yet another unscheduled meeting---this one after the Yellen/Obama get together.

            At the moment, it looks like any central banker could read the NY City telephone book to the Street and it would be interpreted as good news.  I don’t see how the global economy/stock valuation dichotomy can continue; though clearly, it has taken a lot longer than I could ever imagine.  I would continue to sell a portion of any holding where the stock is at or near its all-time high.

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