The Morning Call
4/9/18
The
Market
Technical
The indices
(DJIA 23979, S&P 2613) experienced another roller coaster day, trading up
400 Dow points early on and then selling off later in the day. Volume was down
(continuing the pattern of high volume on down days, lighter volume on up days);
breadth was mixed. Both of the Averages
closed within very short term downtrends and below their 100 day moving
averages (now resistance). The S&P continues
to linger around its 200 day moving average, threatening a challenge; while the
Dow remained further away from its MA. The
DJIA finished in a short term trading range but in intermediate and long term
uptrends. The S&P is in uptrends
across all timeframes. The short term technical picture remains cloudy; but
longer term, the assumption is that equity prices will continue to rise.
The VIX was up 1 % +
(despite an up Market day), ending in a very short term uptrend, above its 100
and 200 day moving averages and the lower boundary of its short term trading
range---reflecting the obvious fact that volatility hasn’t gone away.
The long
Treasury rose 20 cents, remaining within its strong month long bounce (very
short term uptrend) off the lower boundary of its long term uptrend. But
still it continues to trade below its 100 and 200 day moving averages and in a short
term downtrend. However, a challenge of its 100 day moving average seems near;
if successful, it would suggest a swing in bond investor sentiment toward a
weak economy, lower interest rates, stable to lower inflation and, most
critically, a dovish Fed.
The dollar was down
on huge volume, finishing below its 100 and 200 day moving averages and in an
intermediate term downtrend. UUP continues
to trade in a very tight range, which is not usual when bonds are moving big
directionally.
GLD was up, closing
above the lower boundary of its short term uptrend and its 100 and 200 day
moving averages.
Bottom line: the
technicals of the equity market point higher for the long term. Near term direction is in question. But the Averages have plenty of support at
lower levels. It will take a lot more technical damage
before I question whether or not this bull market is over.
The price
movements in TLT, UUP and GLD continue to the trade in their normal correlation
for the first time in a while.
Fundamental
Headlines
No
economic data yesterday from either here or abroad.
However,
there was still news flow on the ever present issue of trade.
China
trade basics (short):
Why
China can’t use its large Treasury holdings as leverage (medium):
***overnight,
Chinese premier makes a conciliatory speech on trade (medium):
Then
trade talks broke down (short):
In
addition, the CBO released its latest economic forecast and it didn’t make for
good reading if you are worried about the growing budget deficit and national
debt. (medium and a must read):
Though
Trump is apparently going to try to resend some of the spending in the latest
budget---I wish (medium):
Bottom line: the
economy is losing strength. If you
believe that adding to the already irresponsibly high national debt will lead to
a further loss of momentum, then the CBO report will not make you happy.
If this
stagnating process continues, then the current trajectory for the Fed’s
quantitative tightening will make you even less happy (medium).
Meanwhile, in
the background, Syria is becoming a serious problem as is the special counsel
investigation. Either one could cause
heartburn.
On the other
hand, first quarter earnings season is about to start and most Street pundits
are optimistic about the results. I am
just not sure why stocks are not responding to this coming stream of good
news---unless they already have.
I
like my cash position.
More
on valuations (medium):
News on Stocks in Our Portfolios
Economics
This Week’s Data
US
The
March small business optimism index was reported at 104.7 versus expectations
of 107.0.
March
PPI was up 0.3% versus consensus of up 0.1%; ex food and energy, it was up 0.3%
versus forecasts of up 0.2%.
International
March
UK household spending grew at the slowest rate in two years.
Other
Trump’s
dangerous economic gambles (medium):
The
impact of Russians sanctions (short):
Saudi’s
talking up $80/barrel oil (short):
What
I am reading today
The
most important investment factor (medium):
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