The Morning Call
2/28/19
The
Market
Technical
The Averages
(DJIA 25985, S&P 2792) continued to languish yesterday---the S&P
struggling with the critical 2800 level.
2800 has shown itself to be an important resistance level, so I think the
odds are decent that a top has been made.
That said, so far there has been no ‘sell the news’ reaction to the
positive news out of the trade talks and the Fed. That all suggests to me that a battle is
occurring between the bulls and bears, the outcome of which is to be determined. So, follow through remains important.
Volume was flat;
breadth weakened.
The VIX was down
3% on a down Market day, once again acting contrary to its normal inverse relationship
with prices. That is supportive of its
move below both MA’s and remaining within a very short term downtrend.
The long bond (120.43)
declined 1 % on decent volume. While it ended
above both MA’s, it is nearing a support level (~119), leaving open the
question, has it made a triple top? The
implication of that would be either a strengthening economy or rising
inflation.
The dollar rose
two cents, continuing to trade in a very narrow range---indicative of little directional
conviction. Still it finished above both
MA’s and within a short-term uptrend.
GLD was down ¾ %
but remains a strong chart.
Bottom line: the
Averages did very little, with the S&P remaining below the 2800 resistance level. While neither could advance on good news (trade
and Fed), there also hasn’t been any ‘sell the news’ reaction. That leaves me uncertain and awaiting follow
through.
Gold’s chart remains strong though if
TLT is selling off; GLD’s future performance will likely be determined by the
reason (economic strength or inflation).
UUP is remains stuck in a very narrow trading range.
Wednesday in the charts.
Fundamental
Headlines
Yesterday’s
economic stats were mixed: weekly mortgage/purchase applications and January pending
home sales were pluses while the December trade deficit and December factory
orders were disappointing.
It
was a big day in DC with multiple hearings on multiple issues:
(1)
Powell gave his second day [to the house] of Humphrey
Hawkins testimony in which he stayed very close to the current Fed narrative,
(2)
Trade czar Lighthizer appeared before the house. His comments suggest that all the US has
right now by way of an agreement is the Chinese offer to up their purchase of
soybeans/oil with little give on the issues of industrial policy and IP theft.
Meanwhile, the trade deficit
continues to grow.
(3)
Trump’s lawyer was also in the house, trashing
Trump. I make no comments on the truth
of his allegations. I leave it to FOX
and CNN to do that. Whether true or not,
the accusations will likely intensify the political turmoil within our ruling
class. While emotions will undoubtedly run
high, that might be good news in that it could keep their attention off doing more
fiscal mischief.
Bottom line: the
good news is that the Fed continues to deliver a Market friendly
narrative. The bad news is that there is
no US/North Korea deal and the chances of a comprehensive US/China deal are
low. That said, I believe that an easy
Fed is the more important element in the Markets’ performance; and until
something occurs that illuminates the negative economic consequences of QE, it
will likely remain so.
News on Stocks in Our Portfolios
EOG Resources (NYSE:EOG): Q4 Non-GAAP EPS
of $1.24 misses
by $0.10; GAAP EPS of $1.54 beats by $0.17.
Revenue of $4.6B (+37.7% Y/Y) beats by $130M.
Boeing signs deal for 42 777
aircraft.
Economics
This Week’s Data
US
January pending home sales rose 4.6%
versus forecasts of up 1.0%.
Preliminary Q4 GDP was up
2.6% versus expectations of up 2.2%; the price index was up 1.8% versus
consensus of +1.7%.
Weekly jobless claims rose 8,000, in
line.
International
The February Chinese manufacturing
PMI came in at 49.2 versus consensus of 49.4.
On the other hand.
Other
The
social impact of the misallocation of assets.
The
impact of the Fed balance sheet on bank reserves.
Ballooning
global debt.
January
median household income.
Oil spikes as
OPEC sticks with its production cuts.
What
I am reading today
Trump’s
financials are out.
Crypto innovation needs
guidance (rules).
Numbers are not
reality.
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