The Morning Call
4/21/17
The
Market
Technical
So much for the
bears winning. The indices (DJIA 20578,
S&P 2355) staged a moonshot yesterday as hope that the Trump/GOP fiscal
program is back on track. Volume rose,
breadth improved, though not as much as I would have thought. The Dow
ended below the upper boundaries of its very short term downtrend, while the
S&P closed right its boundary. The
VIX (14.1) fell 5 ¼ %, but remained 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 {19410-21635}, [c] in an
intermediate term uptrend {11963-24812} 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 {2269-2602},
[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 rose, closing
above its 100 day moving average (now support), above its 200 day moving
average (now support), in a very short term uptrend and below the upper boundary
of its short term downtrend.
The dollar rose
fractionally, 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 was spanked
once again, despite a barrage of OPEC related happy talk on production cuts.
Bottom line: it
sure looks like I could easily go 0 for 2 on short term technical calls:
(1) I thought
that the bears were starting to get the upper hand. While the bulls are not yet in full control,
clearly the bears have lost the initiative,
(2) I thought
that technicals would give directional guidance before the fundamentals
did. News on fundamentals seem to have
provided the impetus for trading in the last three days.
Until the indices
successfully challenge the upper boundaries of their very short term downtrends,
I cannot concede that the bulls have regained the upper hand. However, it will not take much for that to
happen. Plus, longer term, given that they are in uptrends in all major
timeframes and are above both moving averages, they are already in control.
Finally, I note
that yesterday’s pin action in the long bond, gold and the dollar did not
reflect the sudden revival of the Trumpflation trade.
The
latest from Doug Kass (medium):
Fundamental
Headlines
Yesterday’s
economic releases were mixed: weekly jobless claims were above estimates while
the leading economic indicators were better than expected---the latter being
far more important.
An
interesting indicator (medium and a must read):
Overseas,
the March Japanese trade surplus shrank to 14 month low.
***overnight,
the April EU flash composite PMI was up versus the March reading; the IMF said
that it would provide Greece with bail out money for a year at which time it is
hoped that the country will qualify for the current ECB QE related bond
purchases.
None
of that mattered. Indeed, I guess that it is an understatement to say that
stocks went nuts yesterday on renewed hope of healthcare reform and tax
reform. How long this new round of Trumpflation
euphoria lasts will most likely be determined by the bulls**t content in the
promises. Presented with no comment:
(1)
healthcare compromise (medium):
(2)
tax reform (medium):
Further, Trump
issued another executive order. This one
orders the Commerce Department to study the impact that large amounts of steel
imports have on the US industrial base.
In short, if the US doesn’t do something to maintain steel production
could it potentially leave us vulnerable in case of war, trade or shooting?
In addition, the
Donald is expected to issue multiple executive orders to day directing Treasury
to lower tax regulations and revaluate parts of Dodd Frank.
Finally, while not
much has been said about infrastructure spending, plans are in the works.
Bottom line: clearly,
investors were joyous over the news yesterday.
But the quality of the follow through by the administration delivering
the promised reforms will be what determines the real Market and economic
impact. All we have right now is the
promising comments of a couple of well-placed individuals---who I would note made
almost diametrically opposed comments as little as a week ago. And not to be too
cynical, but Trump’s first 100 days will end soon and this sudden flurry of
activity just may be related. That doesn’t mean that circumstances haven’t
changed; but there is room for healthy doubt.
Nonetheless, if Trump/GOP are able to deliver on meaningful healthcare
and tax reform, it will have an effect on our long term secular economic growth
rate assumptions and could impact the short term if improved sentiment
stimulates economic activity. Meanwhile,
we can’t ignore what appears to be a near term softening in the economy.
A
message from Paul Tudor Jones (medium):
Investing for Survival
The
world’s second most deceptive chart.
News on Stocks in Our Portfolios
Schlumberger (NYSE:SLB): Q1 EPS of $0.25 in-line.
Revenue of $6.89B (+5.7% Y/Y) misses
by $100M
Economics
This Week’s Data
March
leading economic indicators was reported at +0.4% versus forecasts of +0.2%.
(today’s must read):
Other
Politics
Domestic
CIA/FBI admit
that Russia wasn’t the source of WikiLeaks leaks (short):
International
China appears to be stepping up the
pressure on North Korea:
And:
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