The Morning Call
3/9/18
The
Market
Technical
The indices
(DJIA 24895, S&P 2738) closed on an up note yesterday in response to Trump’s
dovish tariff announcement. Still volume
was down (at an already low level). Breadth
remained mixed. The Averages are above
both moving averages and within uptrends across all major timeframes. The
technical assumption is that long term stocks are going higher. However, the indices are now stuck in a
narrowing range defined by lower highs and higher lows. In addition, they need to overcome their
former highs before we have an all clear signal.
The VIX fell another
6 ¾ %, ending below the lower boundary of its short term uptrend; if it remains
there through the close next Monday, the trend will reset to a trading range. This
pin action may be anticipating a drop in volatility, which would be a plus for
stocks.
The long
Treasury rose ½ %, but that did little alter its downward momentum. The only remaining support level is the lower
boundary of its long term uptrend which remains very near. If breached, it would clearly intensify
investors’ concern about rising interest rates/inflation
The dollar also
rose, ending below both moving averages and in an intermediate term
downtrend. It remains an ugly chart and
at odds with TLT.
GLD was retreated
by ¼ %, but still finished above its 100 and 200 day moving averages and in a
short term uptrend. So momentum remains
to the upside, though it must still overcome a very short term downtrend.
Bottom line: the
technicals of the equity market point higher for the long term, though short
term is direction is in question. TLT,
UUP and GLD responded, as they should, to the Trump’s more moderate tone on
tariffs (see below).
Yesterday
in charts (short):
Fundamental
Headlines
Yesterday’s
economic data releases were negative: February retail chain store sales were
soft and weekly jobless claims rose.
Trump’s
action on tariffs yesterday was a proclamation not an executive order. A proclamation has no legal standing. The
legal, executive orders will supposedly come next week. In addition, Mexico and Canada get special
treatment until a NAFTA agreement is signed (assuming it is); plus there are
other provision allowing allies to apply for exemptions. In effect, he told the world what he intended
to do but delayed any implementation in order to give most parties the
opportunity to offer their best deal. My
bottom line is that the Donald is apparently following his ‘art of the deal’
game plan, thereby (hopefully) lowering the odds of a trade war. The question is, will it work?
Some
steel sector indicators short):
In
other news, the ECB met, left rates unchanged but modified its narrative to a
slightly more hawkish tone. I linked to
a discussion in yesterday’s Morning Call.
Here is more analysis (medium):
***overnight,
Trump agrees to meet with Kim Jong Um (medium):
Bottom
line: the potential good news is that Trump actions on trade may be more
rational than his rhetoric. The
potential bad news is that (1) the Fed seems intent in believing its own bulls**t,
suggesting that not only is QE ending but may be faster than many expect and
(2) the ECB is starting to lean in the direction of unwinding its own version
of QE. When QE starts ending, so does
the mispricing and misallocation of assets.
News on Stocks in Our Portfolios
Economics
This Week’s Data
US
February
nonfarm payrolls blew estimates away, rising 313,000 versus expectations of
205,000. However, average hourly
earnings declined.
International
February
Chinese CPI was higher than expected while PPI was lower.
The
February German trade surplus was larger than anticipated while industrial
production was well below estimates.
February
UK retail sales were below forecast while industrial production and factory
orders were above.
The
BOJ met and left rates and QE unchanged.
In addition, Kuroda completely walked back his earlier statement regarding
the unwinding of QE.
Other
January
consumer credit grew at the slowest rate in four months.
What
I am reading today
The soaring cost of old
age (medium):
Short term performance versus long
term performance (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