Monday, April 9, 2018

Monday Morning Chartology


The Morning Call

4/9/18

The Market
         
    Technical

            After a see saw week, the S&P ended the week on a down note, preparing to challenge its 200 day moving average for the fourth time.  Given the overwhelming volume of support (moving averages and uptrends), the assumption remains that stock prices are heading higher.  However, if the S&P successfully challenges its 200 day moving average, the next level of support is 200 points lower.

            What was behind Friday’s afternoon sell-off? (medium):




            The long Treasury had a volatile week but continued to trade in a narrowing range bounded by its moving averages on the upside and the lower boundary of a very short term uptrend on the downside.  At the moment, bond investors appear to be betting on lower rates (higher prices) which would be in line with the poor economic numbers we have been getting of late.



            The dollar still isn’t experiencing the volatility that is apparent in the other indicators.  It is near challenging numerous resistance level, more by virtue of their downward trajectory than by its own upward course.  I am not sure what to make of this performance except that no one may be willing to make a big bet on the dollar until the uncertainty being demonstrated by the price action in stocks, bonds and gold is resolved.



            Like equities and bonds, GLD is struggling to maintain prior momentum and its resolution will likely be dependent on equities and bonds.  At the moment, its pin action suggests lower stock and bond prices.



            The VIX is building an ascending wedge formation (unable to make a new high, making progressively higher lows).  Like every other pattern of this kind, however it is resolved tends to have follow through in the direction of the break.  In this case, there is lots of support (both moving averages and a very short term uptrend).  So the assumption is that it will be resolved to the upside.



    Fundamental

       Headlines

Last week’s economic stats were overwhelming negative and that included three primary indicator.  Score: in the last 130 weeks, forty-four were positive, sixty-one negative and twenty-five neutral.

            That was matched by the overseas dataflow which was lousy from all major economic entities (EU, Japan, China).

            The bottom line: our forecast of a struggling economy seems more right than ever.  Not that the dream of a ‘synchronized global recovery’ has gone away, but it appears increasingly to be a wet one.

Most of the Market volatility was a function of investors seeming inability to figure out Trump’s trade strategy (is he bluffing or not?); at one time assuming that he is bluffing (Market up) followed by one in which they assume that he is not (Market down).   That volatility is probably not going away until investors make up their minds because Trump will likely continue to beat them over the head with his unending flow of tweets. 

Meanwhile, the economic numbers coming in from all corners of the globe are concerning, at the very least.  Plus first quarter earnings season is about to start; and analysts have gotten jiggy with it as a result of the tax cuts.  So the question is, will investors continue to largely ignore this other data as they stew over trade issues?

            First quarter earnings expectations (medium):

    News on Stocks in Our Portfolios
 
           

Economics

   This Week’s Data

      US

     International

    Other

            Fed policy is now restrictive (medium):

            Yellen on the federal deficit (medium):

            Update on auto loans (medium):

            Update on big four economic indicators (medium):

What I am reading today
           
            Six lessons from Ed Yardini (short):


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