The Morning Call
4/26/18
The
Market
Technical
In a roller
coaster day, the indices (DJIA 24083, S&P 2639) managed to close to the
upside. Volume was down slightly but still high; breadth was mixed. The
S&P ended within a very short term downtrend. While the Dow had negated its downtrend, it
is now back below the former upper boundary, raising the question as to whether
that break was a false flag. Both
finished below their 100 day moving averages (now resistance). Intraday both edged near their 200 day moving
averages and then bounced. The DJIA closed
in a short term trading range but in intermediate and long term uptrends. The S&P is in uptrends across all
timeframes. The short term technical picture remains cloudy. Longer term, the assumption is that equity
prices will continue to rise.
The VIX fell 1%, but remained
above its 100 and 200 day moving averages and the lower boundary of its short
term trading range.
The long
Treasury continued its decline, ending below its 100 and 200 day moving
averages and in a short term downtrend. It
closed below the lower boundary of its long term uptrend (if it remains there
through the close next Tuesday, it will reset to trading range). A breach of that trend line would have major technical
significance as it would mark the end of a thirty year decline.
The
positive side of rising yields (medium):
https://www.bloomberg.com/view/articles/2018-03-16/rising-treasury-yields-are-a-good-problem-to-have
The dollar resumed
its upward climb, ending above the upper boundary of its intermediate term
downtrend for the fourth day, re-setting to a trading range and above its 100 day
moving average, reverting to support. UUP
remains below its 200 day moving average but just barely.
GLD was down ½ %,
finishing below the lower boundary of its short term uptrend, re-setting to a
trading range. It remained above its 100
(just barely) and 200 day moving averages.
Bottom line: clearly,
there is a lot occurring technically: the equity bulls and bears are duking it
out within a narrowing range, bonds are near breaking a 30 year bull trend, the
dollar is responding to the bond action by breaking to the upside and GLD, also
responding to bonds, is breaking to the downside. It could be that we are just witnessing an
investor hissy fit and stability will return.
On the other hand, much bigger changes could be taking place in Market
psychology. Patience. I love my cash.
Fundamental
Headlines
Only
a minor stat released yesterday: weekly mortgage and purchase applications were
flat to down from the prior week’s numbers.
Nothing from overseas.
Interest
rates and earnings reports remained the major headlines; and uncertainty best
describes both. As I noted above, prices
are telling that big changes seem to be happening in investor perspectives of
both.
With respect to
interest rates, the question is, are rates increasing because of an improving economy
and what would be a natural rise in inflation accompanying it or are they rising
because the economy is maxing out (growing more slowly because it doesn’t have
the capacity) and supply/demand is out of balance. More important, which one does the Fed think that
it is and how will it respond? You know
my opinion (the latter alternative). But
that has yet to be determined.
Investor
schizophrenic reactions to earnings reports continued, frequently pushing
prices higher immediately after the announcement and then declining
subsequently.
Bottom
line: we know that this earnings season has been spectacular to date; but we
knew that was going to occur and we know that investors have apparently not
been impressed. We also know interest
rates are rising but we don’t know which narrative (stronger growth/stagflation)
is driving that move.
I
await the resolution of these issues.
Are
we headed for stagflation? (medium):
Is
the ECB already tapering? (medium):
ECB
meets and leaves policies unchanged (short):
News on Stocks in Our Portfolios
Exxon Mobil (NYSE:XOM) declares $0.82/share quarterly dividend, 6.5% increase from
prior dividend of $0.77.
W.W. Grainger (NYSE:GWW) declares $1.36/quarterly dividend, 6.3% increase from
prior dividend of $1.28.
Revenue of $3.7B (+6.6% Y/Y) beats by $10M.
United Parcel Service (NYSE:UPS): Q1 EPS of $1.55 in-line.
Revenue of $17.11B (+10.3% Y/Y) beats by $670M
Revenue of $3B (+9.9% Y/Y) beats by $60M.
Revenue of $12.56B (+4.2% Y/Y) beats by $160M.
Revenue of $38.04B (-3.4% Y/Y) misses by $1.27B.
Revenue of $5.2B (-13.2% Y/Y) beats by $10M.
Economics
This Week’s Data
US
March
durable goods orders rose 2.6% versus expectations of up 1.7%; however, ex
transportation, they were flat versus estimates of up 0.5%.
The
March trade deficit was $68 billion versus forecasts of $74.5 billion.
Weekly
jobless claims fell 21,000 versus consensus of down 2,000.
International
Other
Treasury
kills 300 IRS regulations (short):
Home
unaffordability reaches new high (short):
Stephen
Roach on the US’s weak case against China (medium):
The
Fed is in a pickle (medium):
More
optimism from Ed Yardini (short):
What
I am reading today
North
Korean nuclear test site collapses (medium):
Be
careful what you choose (medium):
Happy
birthday, DNA (short):
Fixing
the flaws in the Iran nuclear deal (medium):
Real
estate versus stocks (medium):
Is bitcoin a scam? (medium):
Quote of the day (short):
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