The Morning Call
3/20/18
The
Market
Technical
The indices
(DJIA 24610, S&P 2712) were pounded yesterday, putting the pin action back
in the ‘sell the rip’ mode. Volume was down
from Friday’s quad witching session; but that is not surprising. Breadth was weak.
The good news is
that the indices are above both moving averages and within uptrends across all
major timeframes. The bad news is that both Averages broke out of their developing
pennant formations to the downside.
Historically, that means lower prices.
The technical assumption remains that long term stocks are going
higher. However, the question is, if
there is more downside, will it be big enough to begin successfully challenging
those moving averages or uptrends?
The VIX exploded
upwards by 20%, ending above the upper boundary of its very short term downtrend;
if it remains there through the close today, the downtrend will be negated. If
the indices continue to slide, then the recent period of VIX calm may be
over. ‘If’ being the operative word.
The long
Treasury declined, finishing right on the upper boundary of its former very
short term downtrend just two day after negating it. However, follow through on the downside is
needed before that very short term downside is reestablished. Whatever happens to the very short term
trend, the momentum in TLT is still lower.
The dollar fell. While it is struggling to stabilize, the
trend remains down.
GLD rose,
regaining the lower boundary of its short term uptrend which it had broken on Friday. So the chart remains upbeat.
Bottom line: the
technicals of the equity market point higher for the long term; though very
short term the pin action suggests some more downside. It is not surprising that yesterday’s negative
sentiment in the equity market spilled over to bonds and the dollar and helped
gold.
Fundamental
Headlines
There
were no economic data releases yesterday.
But there was no shortage of news to keep the chattering class busy.
First, the GOP
unveiled a $1.2 trillion spending bill.
Which only adds to the
problem that the national debt is growing faster than GDP (medium):
Second, on Friday, Trump is
set to unleash $60 billion in tariffs on Chinese goods (medium):
Third, the Fed starts its
March meeting today and as usual, investors are worried about a more hawkish
outcome (a faster unwinding of QE).
Plus,
there were also a couple of potentially market impacting developments
Facebook
revealed a breach of over fifty million subscriber accounts. That got investors worrying about the potential
effect this could have on advertising revenue and the possibility of government
intervention.
As
often happens in a period of negative sentiment, investor concern spilled over
into the other social media stocks.
Remember the market capitalization of these stocks are a huge percentage
of the indices and they are expensive, ala 2000 market.
And
the Trump/FBI faceoff is getting nuttier by the minute and that seems to be causing
the willies among investors.
Bottom line: investors
have a lot on their minds, some good, some bad.
Yesterday, bad clearly was in the forefront. The question is, are investors really
starting to get worried about uncontrolled spending, a clueless Fed and equity
overvaluation or was this just a one day phenomena?
News on Stocks in Our Portfolios
Revenue of $9.78B (+5.5% Y/Y) in-line.
Economics
This Week’s Data
US
International
Other
Xi
centralizes control over the Chinese financial sector (medium):
Bitcoin
collapses (medium):
What
I am reading today
The
best investment advice (short):
Ancient
DNA is rewriting human history (medium):
Visit Investing
for Survival’s website (http://investingforsurvival.com/home)
to learn more about our Investment Strategy, Prices Disciplines and Subscriber
Service.
No comments:
Post a Comment