The Morning Call
1/31/18
This weekend is our
granddaughter’s birthday, so we are leaving this afternoon to join her family
of a long weekend. See you on Monday.
The
Market
Technical
The indices
(DJIA 26076, S&P 2822) took another shellacking yesterday, with the Dow
closing right on the upper boundary of its short term trading range. Still as selloffs go this is a pimple on a
goat’s ass. It will take a lot more of
this kind of pin action before anyone can suggest anything other than a pause
that refreshes.
Volume rose;
breadth weakened. Long term, the
Averages remain robust viz a viz their moving averages and uptrends across all
timeframes. Short term, they are above the resistance level marked by their
August highs, meaning that there is no resistance between current price levels
and the upper boundaries of their long term uptrends. The technical assumption
has to be that stocks are going higher.
The VIX was up
another 7%, clearly reflecting investor uncertainty.
The long
Treasury was off again, continuing its downward trend and moving it within a
point of the lower boundary of its short term trading range. It would appear the recent question over
follow through is being answered to the downside; though it remains in a
technical no man’s land.
And:
The
30 year triggers Gundlach’s threshold (short):
And the Treasury
increases its auction sizes (medium):
The EU also has
a problem (medium and a must read):
The dollar was down
fractionally, doing little to improve an otherwise sick chart but also
demonstrating weak follow through to the downside.
GLD declined,
trading below the lower boundary of its very short term uptrend for a second
day and negating that trend. However,
the chart continues to look good.
Bottom line:
equity investors seemed most concerned about what Trump might say tonight; and
who can blame them? That said, what they
are worried about are comments that could be negatively interpreted regarding
the dollar and trade relations.
However, the
Averages remain quite strong with regard to almost all trend indicators. So as I noted above, it will take a lot of
bad news to even touch, much less successfully challenge, any of the trend or
momentum indicators.
Fundamental
Headlines
Investors
appear to remain concerned about rising interest rates, a falling dollar and
the potential impact of deteriorating trade relations. What seemed to accentuate that point
yesterday was the prospect of the Donald saying something stupid or incendiary
in the state of the union address that could be interpreted negatively on one
or more of those issues. My guess is
that Trump’s Davos speech was a warm up for the SOTU, so I don’t think that
there will be any fireworks (there weren’t).
That said, what
Trump does or doesn’t say is a lot less important than what has already been
done with regard to the aforementioned issues.
Investors finally seem to be waking up to the facts that (1) the Fed has
overstayed its easy money policy and has no good alternatives going forward,
(2) deficit spending is not a plus in the final stages of an economic recovery
and (3) free trade has made us better off economically and undoing that would
not be to our advantage.
Bottom line: the
question is, is this a one day affair providing an excuse to take some profits
or are investors really starting to factor in the potential for higher rates, a
weaker dollar and trade disruption.
Given the level of euphoria of late, I would have to say the
former. But at least, the important
considerations have gotten a little attention.
All-time
highs, risk and consequence (medium):
News on Stocks in Our Portfolios
Revenue of $25.4B (+9.1% Y/Y) beats by $710M.
Revenue of $3.24B (+8.4% Y/Y) beats by $60M.
Revenue of $3.96B (+16.1% Y/Y) beats by $230M.
Economics
This Week’s Data
US
January
consumer confidence came in at 125.4 versus expectations of 123.6.
Weekly
mortgage applications fell 2.6% while purchase applications were down 3.0%.
The
January ADP private payroll report showed job increases of 234,000 versus
estimates of +195,000.
International
January
German unemployment reached a record low.
January
Chinese manufacturing PMI was below forecasts while the services PMI was above.
Other
China’s
potential response to US tariffs (medium):
US
2019 budget deficit could top $1 trillion (medium):
What
I am reading today
50 best movies of all
time.
S**thouses (medium):
How to watch the 1/31 lunar eclipse
(medium):
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