The Morning Call
2/11/19
The
Market
Technical
The
S&P (1) tried to challenge its 200 DMA [now resistance] and failed, (2) successfully
challenged its 100 DMA [now support] but (3) has broken a very short term
uptrend---leaving us with mixed directional signals.
The
long Treasury has reset its very short term uptrend and remains above both MA’s---all
suggesting lower rates.
The
dollar remains above both MA’s and in a short term uptrend. But it has been unable to break above a trading
range that goes back to October 2018.
Sooner or later something will have to give (MA’s, STUT versus October
to present trading range).
Gold’s
chart just keeps getting better: (1) it is now in both a short term and very
short term uptrend and (2) it is above both MA’s with the 100 DMA about to cross
above its 200 DMA. Generally, gold advances
on lower interest rates (which we have) and a weaker dollar (which we don’t
have). On the other hand, bonds, the
dollar and gold are all safety trades---if you want to be pessimistic.
The
VIX has now taken out both MA’s---both now being resistance levels. However, the short term uptrend is still intact,
having bounced off the lower boundary last week.
Overall,
I would judge the technical picture as mixed and lacking any directional
momentum. Not surprising given the uncertain
fundamentals.
Fundamental
Headlines
The
US economic data for the week of 1/28 was mixed but the primary indicators were
overwhelmingly upbeat. So, I score it a positive. On the other hand, the
international stats continued to be poor.
The
week of 2/4 saw a reversal in the US stats with a majority of the numbers
negative as well as with the primary indicators. Negative.
Score: in the last 174 weeks, fifty-seven positive, seventy-seven negative
and forty neutral. Again, the international
data was downbeat.
https://www.zerohedge.com/news/2019-02-11/paul-krugman-warns-us-wildly-unprepared-imminent-recession
Not
much changed on the political front---still facing a government shutdown, still
uncertainty surrounding the China trade talks.
The Fed did continue to provide a dovish narrative which I assume
accounts to the better pin action in gold and the long bond.
Earnings season
is not going so well. The latest stats
suggest a slightly down overall result which would be ample reason for stocks losing
upside momentum.
Bottom line: I see
nothing that would alter my forecast of a slowing economy---and I don’t think that a more dovish Fed will help. Though if it is as dovish as it is suggesting,
that will give some buoyancy to stocks.
Note that it continued to shrink its balance sheet over the last two
weeks.
News on Stocks in Our Portfolios
Economics
This Week’s Data
US
International
Q4
UK GDP came in +0.2% versus expectations of +0.3%; December industrial
production fell 0.5% versus estimates of up 0.1%.
Other
What
I am reading today
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