Friday, April 21, 2017

The Morning Call--So much for the bears winning

The Morning Call

4/21/17

The Market
         
    Technical

So much for the bears winning.  The indices (DJIA 20578, S&P 2355) staged a moonshot yesterday as hope that the Trump/GOP fiscal program is back on track.  Volume rose, breadth improved, though not as much as I would have thought.   The Dow ended below the upper boundaries of its very short term downtrend, while the S&P closed right its boundary.  The VIX (14.1) fell 5 ¼ %, but remained above the lower boundary of its very short term uptrend, above its 100 day moving average (now support), above its 200 day moving average (now support) and in a short term trading range (it closed above the upper boundary of its former short term downtrend). 

The Dow closed [a] above its 100 day moving average, now support, [b] above its 200 day moving average, now support, [c] in a short term uptrend {19410-21635}, [c] in an intermediate term uptrend {11963-24812} and [d] in a long term uptrend {5751-23390}.

The S&P finished [a] above its 100 day moving average, now support, [b] above its 200 day moving average, now support, [c] within a short term uptrend {2269-2602}, [d] in an intermediate uptrend {2092-2696} and [e] in a long term uptrend {905-2591}.

The long Treasury retreated, ending above its 100 day moving average (now support), below its 200 day moving average (now resistance), in a very short term downtrend and in a short term trading range.

GLD rose, closing above its 100 day moving average (now support), above its 200 day moving average (now support), in a very short term uptrend and below the upper boundary of its short term downtrend. 

The dollar rose fractionally, ending above its 100 day moving average (now support), below its 200 day moving averages (now resistance), below the upper boundary of its very short term downtrend and in a short term uptrend.

Oil was spanked once again, despite a barrage of OPEC related happy talk on production cuts.

Bottom line: it sure looks like I could easily go 0 for 2 on short term technical calls:

(1) I thought that the bears were starting to get the upper hand.  While the bulls are not yet in full control, clearly the bears have lost the initiative,

(2) I thought that technicals would give directional guidance before the fundamentals did.  News on fundamentals seem to have provided the impetus for trading in the last three days. 

Until the indices successfully challenge the upper boundaries of their very short term downtrends, I cannot concede that the bulls have regained the upper hand.  However, it will not take much for that to happen. Plus, longer term, given that they are in uptrends in all major timeframes and are above both moving averages, they are already in control.
           
Finally, I note that yesterday’s pin action in the long bond, gold and the dollar did not reflect the sudden revival of the Trumpflation trade.

            The latest from Doug Kass (medium):

    Fundamental

       Headlines

            Yesterday’s economic releases were mixed: weekly jobless claims were above estimates while the leading economic indicators were better than expected---the latter being far more important.

            An interesting indicator (medium and a must read):

            Overseas, the March Japanese trade surplus shrank to 14 month low.

            ***overnight, the April EU flash composite PMI was up versus the March reading; the IMF said that it would provide Greece with bail out money for a year at which time it is hoped that the country will qualify for the current ECB QE related bond purchases.

            None of that mattered. Indeed, I guess that it is an understatement to say that stocks went nuts yesterday on renewed hope of healthcare reform and tax reform.  How long this new round of Trumpflation euphoria lasts will most likely be determined by the bulls**t content in the promises.  Presented with no comment:

(1)   healthcare compromise (medium):

(2)   tax reform (medium):

Further, Trump issued another executive order.  This one orders the Commerce Department to study the impact that large amounts of steel imports have on the US industrial base.  In short, if the US doesn’t do something to maintain steel production could it potentially leave us vulnerable in case of war, trade or shooting?

In addition, the Donald is expected to issue multiple executive orders to day directing Treasury to lower tax regulations and revaluate parts of Dodd Frank.

Finally, while not much has been said about infrastructure spending, plans are in the works.


Bottom line: clearly, investors were joyous over the news yesterday.  But the quality of the follow through by the administration delivering the promised reforms will be what determines the real Market and economic impact.  All we have right now is the promising comments of a couple of well-placed individuals---who I would note made almost diametrically opposed comments as little as a week ago. And not to be too cynical, but Trump’s first 100 days will end soon and this sudden flurry of activity just may be related. That doesn’t mean that circumstances haven’t changed; but there is room for healthy doubt.  Nonetheless, if Trump/GOP are able to deliver on meaningful healthcare and tax reform, it will have an effect on our long term secular economic growth rate assumptions and could impact the short term if improved sentiment stimulates economic activity.  Meanwhile, we can’t ignore what appears to be a near term softening in the economy.

            A message from Paul Tudor Jones (medium):

       Investing for Survival
   
            The world’s second most deceptive chart.


    News on Stocks in Our Portfolios
 
Kimberly-Clark (NYSE:KMB) declares $0.97/share quarterly dividend, in line with previous.

Schlumberger (NYSE:SLB): Q1 EPS of $0.25 in-line.
Revenue of $6.89B (+5.7% Y/Y) misses by $100M

Economics

   This Week’s Data

            March leading economic indicators was reported at +0.4% versus forecasts of +0.2%. (today’s must read):

   Other

Politics

  Domestic

CIA/FBI admit that Russia wasn’t the source of WikiLeaks leaks (short):

  International

            China appears to be stepping up the pressure on North Korea:

                And:

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