The Morning Call
4/20/17
The
Market
Technical
The indices
(DJIA 20523, S&P 2342) declined a second day, again on mostly bad news. Volume rose, breadth deteriorated. Both of the Averages ended below the upper
boundaries of their very short term downtrends.
The VIX (14.9) rose 3 ½ %, remaining above the lower boundary of its
very short term uptrend, above its 100 day moving average (now support), above
its 200 day moving average (now support) and in a short term trading range (it
closed above the upper boundary of its former short term downtrend).
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 {19376-21635}, [c] in an
intermediate term uptrend {11942-24791} 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 {2267-2600},
[d] in an intermediate uptrend {2092-2696} and [e] in a long term uptrend
{905-2591}.
The long
Treasury retreated, ending above its 100 day moving average (now support),
below its 200 day moving average (now resistance), in a very short term
downtrend and in a short term trading range.
GLD fell, but closed
above its 100 day moving average (now support), above its 200 day moving
average (now support), in a very short term uptrend. However, it traded back
below the upper boundary of its short term downtrend, negating Tuesday’s break.
The dollar rose,
ending above its 100 day moving average (now support), below its 200 day moving
averages (now resistance), below the upper boundary of its very short term
downtrend and in a short term uptrend.
Oil got hammered
on rising inventories and rising US productions stats.
Bottom line: yesterday’s
the pin action was a repeat of Tuesday’s---opening flat to down, fading further
throughout the day with no meaningful response from the bulls. The last two trading days have broken the
recent pattern of strong opens in one direction then fading that move for the
rest of the day. This change suggests
that the bears are winning this standoff at least in the short term. It is still a bit too soon to tell. But I will note, that the Dow has traded down
below the trading range of the last three weeks; the S&P has not. Holding me back from making a negative
directional call is the fact that long term, the weight of the technical evidence
(moving averages and major trends) still favors the bulls.
Fundamental
Headlines
Only
one minor datapoint was released yesterday: weekly mortgage and purchase
applications were down.
***overnight,
the March Japanese trade surplus shrank to 14 month low; Greece achieved a 2016
budget surplus well above EU/IMF requirements, however, skepticism remains.
There were other news item that seemed to play
on investor sentiment:
(1)
disappointing IBM quarterly results,
(2) rising gasoline
inventories and US shale production [declining oil prices have not been and apparently still aren’t an
unmitigated positive],
A
review of US oil exploration funding plans for 2017 (medium):
(3) a Fed
official talked up the notion of a shrinking Fed balance sheet [which I think
is long past due, a sentiment likely not shared by the Market in general] and another
said that three rate hikes this year is a good idea
The Fed’s beer googles (medium):
(4) Russian
bombers again flew near the Alaskan coastline.
Bottom line: as I
noted above, the trading pattern seems to be changing. For two days in a row, the news flow has been
disappointing, stocks sold off and no one was around to buy the dips. I think
that the important points are (1) the earnings season has started off not quite
as robustly as many had expected/hoped and (2) the economic stats seem to be running
out of their initial post-election euphoric steam. Both could easily change and buyers could
easily return to buy the dip. But for
the moment, the buyers seem to have lost some of their earlier conviction.
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Economics
This Week’s Data
Weekly
jobless claims rose 10,000 versus projections of up 8,000.
The
April Philadelphia Fed manufacturing index came in at 22 versus estimates of
25.5.
Other
Politics
Domestic
Quote of the day
(short):
Goldman looks at
a potential government shutdown, healthcare and tax reform (medium):
Update on
Obamacare---or lack thereof (medium):
International
North
Korea threatens ‘super mighty’ preemptive strike (short):
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