The Morning Call
1/12/18
The
Market
Technical
The indices
(DJIA 25574, S&P 2767) took off like a scalded dog following the PPI print
showing negative growth---presumably on the assumption that little inflation
means an easier Fed and lower interest rates.
Clearly, the stock boys are attempting to put global monetary tightening
behind them. While that may be true,
what we learned this week is that they are very sensitive to any sign that the
easy money party is over.
Volume rose and breadth
was strong. Long term, the Averages
remain robust viz a viz their moving averages and uptrends across all
timeframes. Short term, they are above the resistance level marked by their
August highs, meaning that there is no resistance between current price levels
and the upper boundaries of the Averages long term uptrends. The technical
assumption has to be that stocks are going higher.
The VIX was again up on a solid up Market day,
I think demonstrating that while everyone appears jiggy about those PPI
numbers, somebody in stock land is doing serious hedging.
Likewise, while
the long Treasury recovered (lower interest rates) on decent volume, its rally
was not all that convincing since it remains in a very short term
downtrend. Still it is above its moving
averages and the lower boundaries of its short and long term trends. I continue to believe that the bond crowd is
smarter than the equity players, so I am watching TLT for directional assistance
on inflation and interest rate expectations. But as I noted yesterday: QE may be coming to an end; and investors’
apparent heightened awareness of that fact may keep pressure on the price of
the long bond.
Has
a bear market in bonds really started (medium):
When
did rates bottom (medium):
David
Stockman believes that the bond vigilantes are back (medium):
Yesterday
saw a very positive 30 year bond auction (short):
Bill Gross and
his call that the bull market in bonds is over (medium):
That said the
other indicators that I follow reflected lower inflation expectations ---GLD
up, the dollar down.
I remain
uncomfortable with the overall technical picture.
Fundamental
Headlines
The
news yesterday was the aforementioned PPI number. While it makes great reading as a single
entity, it is really just a retreat in an otherwise solid uptrend dating back
to late 2015. True, it could be a sign
of things to come; and I have to honor than notion. But until the upward trend is broken, it is
nothing but a wiggle in that well defined uptrend.
Chart
of the day:
News on Stocks in Our Portfolios
Revenue of $3.47B (+20.1% Y/Y) beats by $150M.
Economics
This Week’s Data
US
The
December US budget deficit was $23.2 billion versus expectations of $36.0
billion.
December
CPI was up 0.1%, in line; however, ex food and energy, it was up 0.3% versus
forecasts of up 0.2%.
December
retail sales rose 0.4% versus estimates of up 0.5%; ex autos, it was up 0.4%,
in line.
International
December
Chinese exports slowed from their November pace but imports plunged, thereby
raising that country’s trade surplus.
Still this is hardly a sign of a robust economy.
Other
The
global economy is not prepared for the next recession (medium):
An
economic boom in 2018? (medium):
The
alternative outcomes for NAFTA (medium):
The
Atlanta Fed’s business inflation expectations survey (short):
NY
Fed Chief Dudley’s farewell speech (medium):
Quote
of the day (short):
What
I am reading today
Blockchain
is a belief system (medium):
Brian
Wien’s 10 surprises for 2018.
The consequences of wealth
inequality (medium):
Walmart captured the headlines with
a move to increase wages; but hidden the footnotes, it is closing a lot of
stores (medium):
A deal on DACA (medium):
Trump comments suggest a further
easing of tensions with North Korea (medium):
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