The Morning Call
3/1/16
The
Market
Technical
The indices
(DJIA 16516, S&P 1932) sold off from an extended overbought position on
higher volume and mixed breadth.
The VIX was up
3.75%, ending back above the lower boundary of a very short term uptrend which
was confirmed as broken on Friday under our price and distance discipline. I am holding off making a call on the trend
until there is further follow through in either direction.
The Dow closed
[a] below its 100 day moving average, now resistance, [b] below its 200 day
moving average, now resistance, [c] below the lower boundary of a short term
downtrend {16725-17471}, [c] in an intermediate term trading range
{15842-18295}, [d] in a long term uptrend {5471-19343}, [e] and while it made a
second higher high last week, it finished back at the level of its last lower
high.
The S&P ended
[a] below its 100 day moving average, now resistance, [b] below its 200 day
moving average, now resistance [c] within a short term downtrend {1872-1957},
[d] in an intermediate term trading range {1867-2134}, [e] in a long term
uptrend {800-2161} and [f] like the Dow closed back at the level of its last
lower high, having made a one day higher high on last Thursday.
Bearish
crossover (short):
The long
Treasury was up. It finished below the
lower boundary of its very short term uptrend for a second day, confirming the
break of that trend. Nonetheless, it
remains firmly within a short term uptrend and above its 100 day moving average.
GLD rose 1.3%, ending
in very short term and short term uptrends, as well as substantially above its
100 moving average.
Bottom line: yesterday’s
pin action didn’t do a lot to clear up (for me) any of the confusion that was generated
last week. The technical factors continue
mixed; and the only thing that will cure that is a big directional move. So short term, I am convictionless. Though longer term, I believe that [a] we will
not see a new all-time high and [b] we haven’t seen the lows of this cycle yet.
Fundamental
Headlines
The US economic
stats got off to a rough start: the February Chicago PMI, January pending home
sales and the February Dallas Fed manufacturing index were all really bad---sort
of dampens the positive showing of last weeks’ primary indicators.
Overseas, the
important set of news was (1) G20 did little but give lip service to the IMF’s
recent admonishment for new fiscal policy measures to improve global growth;
and before the ink was dry on the G20 communique, (2) Japan voiced its
determination to raise its national sales tax to 10% [how’s that for stimulative
fiscal policy] and (3) China eased its bank reserve requirements [having just
promised to stabilize the yuan right before the G20 meeting].
At the risk of
stating the obvious, in less than 24 hours of the close of the G20 of the four
major global economies [US, EU, Japan, China], 50% of them announced the continuation
of the same tired old policies that have driven the world into the malaise that
it currently finds itself. Unfortunately,
the other 50% are most likely to follow suit---the US, which will almost certainly
be unable to attempt any fiscal policy moves until at least mid-2017 and the EU,
in which the PIIGS can’t enact fiscal stimulus due to debt covenants and the
German’s won’t.
That
is not to say that the ECB and/or the Fed won’t pursue more QE/negative
interest policies. But do I need to
repeat that that is what got the US/global economy in the mess they are
currently in? I am sure that the QEInfinity devotees will be
tickled pink with more dovish moves by the central banks---at least in the
beginning. But sooner or later, the tide
goes out; and when it does, there will be a lot of white flounders running for
cover.
In
other news, EU February CPI was reported at -0.2%, ex food and energy -0.7%.
Bottom
line: the economic stats resumed their dismal
performance and the G20 delivered diddly.
Indeed, immediately following the meeting, two prominent members proved just
how hollow all the central bank rhetoric is by doing the exact opposite of the
recommended policy moves---which is to say more of the same senseless, central
bank hubris that led to the current global economic malaise.
Until these guys
get hit between the eyes with a two by four, economic conditions will not likely
improve and could very well get worse.
‘But given the past relationship between
QEInfinity and investor jigginess, hope will likely continue to spring
eternal. If it does, it makes sense to
use any rebound to take some profits in winners that have held up during recent
decline.’
Investing for Survival
Common
mistakes most investors make.
News on Stocks in Our Portfolios
Medtronic
(NYSE:MDT): FQ3 EPS of $1.06 in-line.
Revenue of $6.93B
(+60.4% Y/Y) misses by $60M
Revenue of $517.2M
(-12.1% Y/Y) misses by $17.49M
Revenue of C$6.37B
(+8.7% Y/Y) beats by C$100M.
Bank of
Nova Scotia (NYSE:BNS) declares C$0.72/share quarterly dividend, 2.9%
increase from prior dividend of $0.70.
Forward yield 5.33%
Payable April 27; for shareholders of record
April 5; ex-div April 1
Economics
This Week’s Data
The
February Chicago PMI came in at 47.6 versus expectations of 52.9.
January
pending home sales declined 2.5% versus estimates of a 0.5% increase.
The
February Dallas Fed manufacturing index was reported at -31.8 versus forecasts
of -30.0.
Other
Don’t
dismiss deflation (medium):
A
world deep in debt (medium):
2%
growth and future prosperity (medium):
Has
an oil price ceiling been set (medium)?
Politics
Domestic
International War Against Radical
Islam
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