The Morning Call
3/29/18
The
Market
Technical
The indices
(DJIA 23848, S&P 2605) declined slightly yesterday, following the recent
pattern of opening up, experiencing huge volatility intraday, then selling off at the end of the day (see link below). Volume was flat; breadth was mixed. Both of the Averages closed below their 100
day moving averages (now resistance) but above their 200 day moving averages
(though not by much. I thought that it
would be challenged yesterday, but wasn’t.
A hint of good news) and within very short term downtrends. The Dow finished in a short term trading
range but in intermediate and long term uptrends. The S&P is in uptrends across all
timeframes. In short, the technical
picture has gone from solidly up to a bit cloudy.
And:
The VIX was up 1
¼ %, ending in a very short term uptrend,
above its 100 and 200 day moving averages and the lower boundary of its short
term trading range---suggesting a more volatility.
The long
Treasury continued its strong month long bounce off the lower boundary of its
long term uptrend. It is still below its
100 (but near) and 200 day moving averages and in an intermediate term
downtrend. So the trend remains down but
any further advance will start to put that in jeopardy. In other words, investors
are developing conviction that either the economy is weakening (lower interest
rates) or there is a negative event coming (safety trade) or, as a trader
friend suggests, there is a huge short squeeze going on.
A
poor seven year Treasury auction (short):
Yield
curve flattens further (short):
The dollar was another
1%---which makes sense if there is a safety trade issue, but not if there is a
weakening economy. Its chart remains
ugly, with UUP trading below its 100 and 200 day moving averages and in an
intermediate term downtrend.
GLD was pounded,
down 1 ¼%, giving up almost all of last week’s gains. And that makes no sense if either rates
continue lower or there is a safety trade issue. It is above its 100 and 200 day moving
averages and within a short term uptrend---though it is approaching the lower
boundary.
Bottom line: investors
once again ‘sold the rips’ yesterday.
However, while the technicals of the equity market still point higher
for the long term, cracks in this thesis remain. So near term direction is in
question. No matter how you feel about
stock valuation, I don’t think that this is a time to be committing cash unless
it is in a company whose stock has been decimated (down 30-50%).
The pin action
in TLT, UUP and GLD remains confusing.
Fundamental
Headlines
Yesterday’s
economic stats were weighed slightly to the upside: February pending home sale
and weekly mortgage/purchase applications were a plus, revised third quarter
GDP growth, price index and corporate profits were mixed and the February trade
deficit was a negative.
The
news flow continues to slow ahead of the Easter holiday. The only headline of substance was a trade
agreement with the South Koreans---which, to be sure, is a positive. As a bonus, a peace process is moving
along. A meeting has been scheduled
between the North and South Koreans on 4/27 and the US is set to meet the North
Koreans in May---which if it leads to a be-nuked North Korea would also be a
plus. But given history, I wouldn’t be
getting jiggy just yet.
There
was more bad news for Facebook (investigations) and a new tweet for the Donald
criticizing Amazon. I mention this
because the social media stocks have been a moving force in the last couple of
years of the up Market; and a continuing flow of negative news will not help
the Averages.
Bottom
line: as I noted yesterday, the real story right now is the Market itself and
the standoff between the bulls and bears---with the bears holding the field on
a very short term basis. Nevertheless, to
declare victory, they have a lot of major support to overcome plus first
quarter earnings season which begins soon and which most pundits believe will
be positive. I await the outcome.
News on Stocks in Our Portfolios
Economics
This Week’s Data
US
February
pending home sales rose 3.1% versus estimates of up 3.0%.
Weekly jobless claims
fell 12,000 versus expectations of down 1,000.
February
personal income was up 0.4%, in line; personal spending was up 0.2%, also in
line.
International
Other
Household
buying plans take a deep dive (medium):
More
(disappointing) news on student loans (short):
Apartment
vacancy rate increases in first quarter (short):
Stockman
on the possible appointment of SF Fed head Williams to run the NY Fed (medium):
Pentagon
‘loses’ $3 billion (aka our money) in Afghanistan. No wonder it needs a bigger budget (medium):
What
I am reading today
Investing
in quality companies is a great strategy as long as you do at the right price
(medium):
Investing
in an era of distractions (medium):
The
largest organ that we never knew we had (a big long but very interesting):
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