The Morning Call
4/18/18
A friend’s work was accepted at
an Austin film festival; so we are going to help celebrate. Back next Monday.
The
Market
Technical
The indices
(DJIA 24786, S&P 2706) kept the rally going. Volume rose and breadth was strong. The Dow closed above the upper boundary of
its very short term downtrend for a second day, negating that trend. However, the S&P ended below its
comparable trend line---though just barely. The S&P ended above its 100 day
moving average (if it remains there through the close on Thursday, it will
revert to support). The Dow finished
right on its 100 day moving average. Both
remained above their 200 day moving averages.
The DJIA finished 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,
but continues to improve. Longer term,
the assumption is that equity prices will continue to rise.
The VIX was down another 8
%, finishing below its 100 day moving average (if it remains there through the
close on Thursday, it will revert to resistance). It is still above its 200 day moving averages
(though not by much) and the lower boundary of its short term trading range.
The long
Treasury was up again, remaining within what is now a strong two month long
bounce (very short term uptrend) off the lower boundary of its long term
uptrend. On the other hand, it
continues to trade below its 100 (though it is getting close) and 200 day
moving averages and in a short term downtrend.
The gap between the lower boundary of its very short term uptrend and
its moving averages is getting very narrow and the short term momentum is to
the upside. A break in this range would
likely point at a further move in the direction of the break.
Plus:
LIBRO’s
surge (medium):
The dollar was
unchanged, finishing below its 100 and 200 day moving averages and in an
intermediate term downtrend. UUP
continues to trade in a very tight range, which is not usual when bonds are
moving big directionally.
GLD was up,
finishing above the lower boundary of its short term uptrend and its 100 and
200 day moving averages. On the other
hand, it has been unable to rise above its February high.
Bottom line: the
indices are attempting to alter their short term downtrend, challenging several
resistance levels; though there is still more work to do before the short term
momentum turns up. Longer term, the
momentum is definitely up.
The price
movements in TLT, UUP and GLD of late have pointed at a weakening economy which
seems to be contrary to the stock Market narrative.
Fundamental
Headlines
Yesterday’s
economic data was mixed to upbeat: March housing starts (primary indicator) were
below expectations though February’s reading was revised up; March industrial production
(primary indicator) was above estimates but the February number was revised
down; month to date retail chain store sales grew slightly faster than in the
prior week.
The
rest of the day was about earnings which have been good and the Market itself
which has also been good. It seems like
the ‘buy the dips’ crowd is starting to regain some confidence.
Bottom
line: that is not to say that trade issues or geopolitical risks have gone away;
though as you know, they have not been at the top of my list of worries.
Famed British
war correspondent is on the ground at the site of the alleged chemical attack
and here is his report (medium and you should read it):
Those include
the performance of the economy (which has been mediocre at best this week and has
included three primary indicators), the direction of inflation (which both the
bond and gold markets are suggesting is not a problem) and Fed policy (which is
tightening). That combo, historically,
has not been great for stocks.
A
look at investor sentiment (medium):
News on Stocks in Our Portfolios
Economics
This Week’s Data
US
Month
to date retail chain store sales grew fractionally faster than in the prior
week.
March
industrial production war reported up 0.5% versus estimates of up 0.3%;
however, the February number was revised down by a similar amount. Capacity utilization was 78.0, in line.
Weekly
mortgage applications rose 4.9%, while purchase applications were up 6.0%.
International
March
UK CPI was up 0.1% versus consensus of up 0.3%; PPI was up 0.2% versus
forecasts of up 0.1%.
Other
Update
on big four economic indicators (medium):
Rescissions
are a first (teeny, weeny) step (medium):
https://www.washingtontimes.com/news/2018/apr/16/rescissions-are-an-important-first-step-toward-get/
Credit
growth and domestic demand growth (medium and a must read):
Trump
fills number two job at the Fed (medium):
Dr.
Ed’s optimistic take on Fed policy (medium):
What
I am reading today
CIA
director meets with Kim Jong Un over Easter weekend (medium):
Three ways to make up for retirement
savings shortfall (medium):
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