The Morning Call
3/21/18
The
Market
Technical
The indices
(DJIA 24729, S&P 2716) managed to recover some of Monday’s losses. Volume was down, but breadth improved. The indices continue to trade above both
moving averages and within uptrends across all major timeframes. So the technical
assumption remains that long term stocks are going higher. On the other hand, they are now in a very
short term downtrend. The key to
negating that trend would be the end of the current ‘sell the rips’ mentality. Until that occurs, short term it looks like lower
prices. The big question is, if there is
more downside, will it be big enough to begin successfully challenging those
moving averages and uptrends?
The VIX was off
4 ¼ %, but still ended above the upper boundary of its very short term downtrend
for a second day, negating that trend.
It appears that the recent calm in the VIX could be over.
The long
Treasury declined, finishing below the upper boundary of its former very short
term downtrend just three days after negating it. However, more 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 rose,
getting back in sync with bonds (yields up, UUP up). While it is struggling to stabilize, the
trend remains down.
GLD fell ½ %, finishing
back below the lower boundary of its short term uptrend, which it broke last
Friday, then reclaimed on Monday; if it remains below that boundary through the
close on Thursday, it will reset to a trading range. Gold appears to be at an important directional
juncture.
Bottom line: the
technicals of the equity market point higher for the long term. The thing that I am watching now is whether
the ‘sell the rips’ mentality holds. If
it does, then very short term the pin action will point down. The big issue is will ‘down’ be big enough to
start taking out major support levels.
TLT, UUP and GLD all traded like rates are going higher, which, to me, seems
at odds with yesterday’s stock market performance.
Fundamental
Headlines
Only
one minor economic stat released yesterday---month to date retail chain store
sales growth improved. Today will be a
big one with the completion of the FOMC March meeting and what it does (raise
rates or not) and says (about the economy and the likelihood of subsequent rate
increases).
Bottom
line: yesterday, there was very little other news with the narrative focused on
the outcome of the FOMC meeting. Absent
from much of the discussion of what the impact of the current out of control
fiscal policy could have on Fed policy, i.e. what happens when the massive government
financing needs meet quantitative tightening?
Owning some cash is probably a good idea.
Forget
the Fed, commodity prices are plunging (short):
Washington’s
fiscal folly (medium):
It
is not different this time (medium):
More
words of caution (medium):
The
latest from Doug Kass (medium):
And
now for some good news: US backing off NAFTA demands (short):
News on Stocks in Our Portfolios
Revenue of $3.88B (+2.4% Y/Y) beats by $100M.
Economics
This Week’s Data
US
Month
to date retail chain store sales grew faster than in the prior week.
Weekly
mortgage applications fell 1.1% while purchase applications were up 1.0%.
The
fourth quarter trade deficit was $128.2 billion versus expectations of $126.8
billion.
International
March
German business conditions were reported are 90.7 versus estimates of 90.0;
however, business expectations were 5.1 versus forecasts of 13.0.
February
UK CPI was up 2.7% versus consensus of up 2.8% while unemployment declined from
4.4% to 4.3%.
Other
Minsky
and asset price inflation (medium and today’s must read):
Assessing
the probability of a recession (short):
GDP
growth nowcasts (short):
Update
on big four economic indicators (medium):
China
as seen from a glass house (medium):
March
chemical activity barometer (short):
What
I am reading today
Three reasons to take social
security early (medium):
Black hole mysteries (medium):
Cryptocurrencies get a break
(medium):
Yellowstone’s largest active geyser
erupts for first time since 2014 (short):
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