Tuesday, April 4, 2017

The Morning Call--Bad day in data land

The Morning Call

4/4/17

The Market
         
    Technical

The indices (DJIA 20650, S&P 2358) staged another late day comeback to finish only modestly down.  Volume fell; breadth deteriorated.  Of particular note was the breakdown in the flow of funds chart.   The VIX (12.3) declined fractionally, ending above the lower boundary of its very short term uptrend, above its 100 day moving average for the second day (now resistance; but if it closes there today, it will revert to support), below its 200 day moving average (now resistance) and in a short term downtrend.  Its rebound leaves complacency on the table.

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 uptrend {19224-21635}, [c] in an intermediate term uptrend {11891-24743} and [d] in a long term uptrend {5751-23390}.

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 uptrend {2248-2581}, [d] in an intermediate uptrend {2077-2681} and [e] in a long term uptrend {905-2591}.

The long Treasury was up .75%, remaining above its 100 day moving average (now support), below its 200 day moving average (now resistance), nearing (again) a minor resistance level, in a very short term downtrend and in a short term trading range.
               
GLD rose, closing above its 100 day moving average (now support), below but nearing its 200 day moving average (now resistance) and within a short term downtrend. 

The dollar was unchanged, ending below its 100 day moving average (now resistance), above but near its 200 day moving averages (now support), in a very short term downtrend and in a short term uptrend.

Bottom line: while the indices were down and remain in very short term downtrends, sellers still can’t sustain major price weakness---likely meaning that buyers are still willing to step in and buy the dips.  That said, the question remains, is the recent downdraft part of a consolidation move or marking a change of direction. 

Yesterday, bonds, gold and oil pin action suggested that their investors are concerned about economic weakness; but their prices have been vacillating between that scenario and the Trumpflation trade.
           
            Insider selling hits six year high (medium):
    Fundamental

       Headlines

            Not a good day in US data land: the March ISM manufacturing index was slightly above expectations but the March Markit manufacturing PMI, February construction spending and March light vehicle sales were below forecasts

            Overseas, it was a different story: the March Japanese and Chinese manufacturing PMI’s were up but below estimates; the March EU countries manufacturing PMI’s were above expectations.

            ***overnight, March EU retail sales were slightly better than anticipated.

            The US stats captured the most investor attention yesterday, though the coming weekend’s Trump meeting with Chinese president Xi took some headlines and is likely to gain focus as the week wears on.

            ***overnight, Trump renews push for healthcare reform (medium):

            Bottom line: as you know, I have been less enthused with the US economic outlook than many others on the Street and yesterday’s numbers support that point of view.  Of course, one day does not a trend make.  Plus, I have acknowledged that the post-election improved sentiment seemed to be having a positive impact on first quarter stats---although, said more accurately, all it did was halt the deterioration in economic activity.  It never clearly portrayed sustained growth.  So the question is, was yesterday’s data a one off event or is the Trump euphoria wearing off and the longer term factors like lousy fiscal and monetary policies reasserting themselves in the numbers?

            My thought for the day: someone once said that if you’re playing poker and you can’t tell who the sucker is, it's likely you. The same can be said for investing; you always want to know what the person on the other side of your trade is thinking, even if---and particularly if---you disagree with it.

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Economics

   This Week’s Data

            The March Markit manufacturing PMI came in at 53.3 versus February’s reading of 54.2.

            The March ISM manufacturing index was reported at 57.2 versus expectations of 57.1.

            February construction spending rose 0.8% versus estimates of up 1.0%.

            March light vehicle sales fell short of forecasts---the lowest level since June 2016.

                The February trade deficit fell to $43.6 billion versus consensus of $44.5 billion.

   Other

            The power of oil (medium and a must read):

            Plus, can OPEC hold together (medium):

            The economy is ruined for many Americans (medium):

            Corporate defaults rise in China (medium):

            Abe advisor says that it is time to pull the plug on QE (medium):

Politics

  Domestic

  International War Against Radical Islam


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