The Morning Call
1/9/19
The
Market
Technical
The Averages
(DJIA 23787, S&P 2574) picked up the pace of the follow through from last
Friday’s powerful rally. That said, both
indices finished below both moving averages.
The Dow finished in a very short-term downtrend and a short-term trading
range. The S&P is in a short-term downtrend. So longer term, there remains
a lot of work to be done to re-establish an uptrend. For instance, the S&P would have to
successfully challenge the upper boundary of its short-term downtrend (~2632)
before it makes any sense to start thinking that the worst is over.
Volume flat;
breadth positive.
The VIX fell 4½
%, but still ended above both moving averages and in very short-term and
short-term uptrends and remains relatively cheap. So, this chart remains a negative for stocks.
The long bond
was down another ¼ %. However, it closed
above its 100 DMA (now support), above its 200 DMA (now support) and in short
and intermediate-term trading ranges and in a very short-term uptrend. Even though it has now been down three days
in a row, no real technical damage has been done.
The dollar was up
on big volume, finishing above both MA’s, in a short-term uptrend and within
the mid-November to present consolidation range. However, it remains near the
lower boundary of that range as well as its 100 DMA. So, a challenge of these boundaries could
still be in the offing.
GLD fell ¼ %, but
ended above both MA’s, within a very short-term uptrend and within a short-term
trading range. It remains a healthy
chart.
Bottom line: there may be more upside
on a very short-term basis; but, eventually, I think that the lows (i.e. the
December 26th low) will get tested.
Of course, the January 3rd higher low could have been that
test, but seemed a bit of a weak challenge to me. So, I think that there are decent odds for a
more substantial test to come.
The long bond investors still don’t seem
overly concerned about higher interest rates.
Ditto for the gold bugs. The
dollar is the only indicator that is suggesting that rates could go higher.
Tuesday in the
charts.
Fundamental
Headlines
Yesterday’s
economic data releases were minor indicators but still negative: growth in
month to date retail chain store sales slowed from the prior week and November
consumer credit rose more than anticipated.
Not a lot in the
headlines:
(1)
positive talk on US/China trade
***overnight, talks wrap up.
(2)
Trump has apparently decided not to invoke emergency
measures to fund ‘the wall’. It probably
wasn’t constitutional anyway. So cooler
heads prevailed. While that might
eliminate a legal battle with congress (over the power of funding) but it will
most likely keep the government closed.
(3)
Brexit continues to promise more UK political/economic
turmoil.
Bottom
line: the Fed will retake the spotlight today with the release of the minutes
from the last FOMC meeting. Investors
will likely be parsing every word for confirmation of the dovish Powell
statement last week.
You know my bottom line on this issue: as
long as the Fed continues a QT policy, liquidity shrinks creating credit
funding problems and putting downward pressure on asset prices. But if Fed policy has returned to being a
hostage of the Market, then the current asset price adjustment may be over.
At the moment,
we just don’t know what the real intent of Powell is; and we likely won’t until
we get the numbers on the Fed’s balance sheet run off.
More on
valuations (must read):
Could
a stock market decline cause a recession?
The
latest from Doug Kass.
The
latest from Jeff Gundlach.
News on Stocks in Our Portfolios
Accenture (NYSE:ACN) acquires Orbium, a management consultancy
and tech services provider to the financial services industry.
Terms weren't disclosed.
Orbium is the largest
services provider for the Avaloq Banking Suite, software used by more than 150
banks and wealth managers worldwide.
Alliance Automotive
Group (AAG), a wholly-owned automotive distribution company of Genuine Parts
Company (NYSE:GPC), has completed the acquisition of German
Hennig Fahrzeugteile Group, effective today.
The Company expects the
acquired business to generate annual revenues of approximately $190M.
Economics
This Week’s Data
US
Growth in month
to date retail chain store sales slowed from the prior week.
Consumer
credit in November rose $22.1 billion versus expectations of up $19.0 billion.
Weekly mortgage applications
soared 23.5% while purchase applications were up 17.0%. Much of this rise reflects seasonal factors,
i.e. nothing happening between Christmas and New Year, then a sudden surge in
activity as everyone gets back to work.
International
The
November EU unemployment rate was 7.9% versus estimates of 8.1%.
Other
Can
the unemployment rate tell us anything about a recession?
What
I am reading today
Is
character destiny?
Things are
heating up in France as demonstrations are banned.
Visit Investing
for Survival’s website (http://investingforsurvival.com/home)
to learn more about our Investment Strategy, Prices Disciplines and Subscriber
Service.
No comments:
Post a Comment