Monday, April 30, 2018

Monday Morning Chartology


The Morning Call

4/30/18

The Market
         
    Technical

            I don’t think that the battle lines between the S&P bull and bears could be much clearer.  The upper boundary is the upper boundary of a very short term downtrend; the lower boundary is the 200 day moving average.  At this moment, in my opinion, nothing else on this chart matters.  This standoff is going to get broken and, historically speaking, the direction of the break will determine the direction of the S&P until it hits either its all- time high on the upside or the lower boundary of its short term uptrend on the downside.



            After a vicious two week sell off in which TLT challenged the lower boundary of its long term uptrend, it rallied hard Thursday and Friday pushing back above the long term trend line.  Short term that leaves intact the long term trend to lower interest rates.  Still TLT faces a lot of overhead resistance (to lower interest rates) in the form of both moving averages and a short term downtrend.



            The dollar rallied hard last week.  It has now reset its intermediate term trend from down to a trading range and it 100 day moving average from resistance to support.  UUP ended above its 200 day moving average for the second day; if it remains there through the close tomorrow, it will revert to support.  This week’s pin action viz a viz TLT is not typical (i.e. if TLT is rallying, UUP should be falling).  On the other hand, the dollar was very docile during a big part of TLT prior decline; so maybe there is some kind of delayed response.  Color me confused.



            After declining enough to reset its short term trend from up to a trading range, GLD is trying to hold above its 100 day moving average.  It was not a surprise that gold traded lower when TLT made that big move down (higher rates generally mean lower GLD prices).  So it is also not a surprise that gold has gained some traction as the long bond rallied.  That said, I didn’t think that the selloff in GLD matched the intensity of the TLT’s decline; and perhaps that was because the fear of inflation (a plus for gold) is growing in investors’ minds.



            The VIX is in a two week struggle to remain above its 100 day moving average.  Since a rising VIX implies greater volatility and lower stock prices, the good news is that it is again challenging the MA; if it remains there through the close tomorrow, it will revert to resistance.  The bad news is that the MA is rising, so if the VIX stays above it, volatility and lower stock prices will remain in our future.



    Fundamental

       Headlines

      
           

    News on Stocks in Our Portfolios
 
Paychex (NASDAQ:PAYX) declares $0.56/share quarterly dividend, 12% increase, from prior dividend of $0.50.
           

Economics

   This Week’s Data

      US

            March personal income rose 0.3% versus estimates of +0.4%; personal spending was up 0.4%, in line; the PCE price deflator was flat versus forecasts of up 0.1%.

     International

            The April Chinese manufacturing PMI was 51.4 versus expectations of 51.3; the services PMI was 54.8 versus 54.5; and the composite PMI was 54.1 versus the March reading of 54.0.

    Other

            Increasing concerns that the central banks don’t have an exit strategy (medium):

What I am reading today

           

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