The Morning Call
3/30/16
The
Market
Technical
The indices
(DJIA 17633, S&P 2055) bolted higher on Yellen’s comments, though volume
remained low; and while breadth improved, it was still mixed. The VIX (14) fell 9%, coming close to
resetting the very short term downtrend that it voided Monday. While it remains well below its 100 day
moving average and within a short term trading range, it is nearing the 10-12
attractive price range.
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 a trading range {15431-17758}, [c] in
an intermediate term trading range {15842-18295} and [d] in a long term uptrend
{5471-19343}.
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 trading range {1867-2104},
[d] in an intermediate term trading range {1867-2134} and [e] in a long term
uptrend {800-2161}.
The long
Treasury jumped 1%, remaining above a Fibonacci support level and is starting
to form a very short term uptrend.
GLD rallied
almost 2%. It has risen enough that it likely
takes further weakness off the table.
Bottom line: the indices closed near the upper boundary of
their recent consolidation range. Given
how well they handled their overbought condition amidst negative Fed and economic
news, the spark provided by Yellen’s comments is likely to push them to another
high and possibly a run at their all-time highs.
Stock
performance in April (short):
Fundamental
Headlines
Yesterday’s
US economic data was positive: month to date retail chain store sales advanced
versus the prior week, March consumer confidence came in ahead of forecasts and
the January Case Shiller home price index was higher than expected. Of course, the latter could be interpreted
positively (improving economy) or negatively (higher inflation), although,
given Yellen’s comments, she apparently is not that worried about inflation.
And
yes, Janet spoke yesterday. Anyone
following the Market over the past seven years would know by the pin action that
her speech was dovish, even if they hadn’t seen or heard any part of it. I had three major takeaways:
(1)
she, in line with the Fed’s Bugs Bunny communication
strategy, cut the legs out from underneath all the hawkish talk last week,
(2)
she hinted that the December rate hike may have been a
mistake,
(3)
she is more worried about growth [lack thereof] than
inflation, especially as it relates to the global, in particular the Chinese,
economy---which goes along with the Mauldin thesis I elaborated on previously.
Goldman’s take
(medium):
The whole speech if you want to
read it:
More on negative interest rates
(medium):
Overseas,
in testimony to how well QE and negative interest rates impact an economy, Japan
reported that February retail sales fell 2.3%.
***overnight,
February Japanese industrial output fell 6.2%.
Bottom line: the
dovish/hawkish dialectic is alive and well and living in the Eccles Building;
and its spokesperson is Bugs Bunny. No
matter, Yellen et al seem to remain bullet proof no matter how clueless they
sound or act. I remain convinced that ultimately
either the Fed will lose its credibility or investors will recognize that
higher stock prices in the face of lower corporate profits doesn’t make sense;
but until that occurs, the pattern is that dovish commentary equals higher
equity prices.
In my opinion,
the current rally represents an excellent opportunity to raise cash reserves by
selling either a portion of your profitable investments and/or sell your
losers.
The
latest from Doug Kass (medium):
More
on Market direction (medium):
Investing for Survival
You
may be a better investor than you think.
News on Stocks in Our Portfolios
·
Hormel Foods (NYSE:HRL) declares $0.145/share quarterly dividend, in
line with previous. (Split Adjusted)
·
Forward yield 1.31%
Economics
This Week’s Data
Month
to date retail chain store sales were stronger than the prior week.
The
January Case Shiller home price index rose 0.8% versus expectations of up 0.7%.
March
consumer confidence came in at 96.2 versus estimates of 94.0.
Weekly
mortgage applications fell 1.0%, purchase applications increased 2.0%.
The
March ADP private payroll report showed jobs advancing by 200,000 versus
forecasts of up 203,000; the February number was revised lower.
Other
Investor
denial about China (medium):
China’s
gift to us (medium):
Stephen
Roach on China’s current problem (medium):
Labor
market rigidity and disaffection of muslim youth (short but a must read):
Does
the Saudi pricing strategy for oil make sense? (medium)
Politics
Domestic
Democratic
socialism (short):
This on Hillary
from my favorite liberal blog (medium):
Fitch downgrades
rating on Chicago (medium):
International War Against Radical
Islam
Visit Investing
for Survival’s website (http://investingforsurvival.com/home)
to learn more about our Investment Strategy, Prices Disciplines and Subscriber
Service.
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