The Morning Call
2/15/19
The
Market
Technical
The Averages
(DJIA 25439, S&P 2745) took a rest yesterday. The Dow ended above its 100 DMA for the third
day, reverting to support and above its 200 DMA (now support) but below the
lower boundary of its newly reset very short term uptrend (if it closes below
this boundary today, it will be voided).
The S&P remained in a very short term uptrend, above its 100 DMA
(now support) but closed right on its 200 DMA (now resistance), stopping the
clock on this challenge. Both remain below their previous lower highs
(~25977, 2800).
Volume rose (this
is option expiration week; so an increase in volume and volatility is to be
expected) and breadth was weak.
The VIX was up
another 3 ½%, continuing its bounce off the lower boundary of its short term
uptrend. But it remains below both MA’s
(now resistance).
The long bond
was up ½%, finishing above both MA’s, in short and intermediate-term trading
ranges. In addition, it ended back above
the lower boundary of its very short-term uptrend, negating Wednesday’s break.
The dollar was down
three cents, finishing above both MA’s, in a short-term uptrend and above the
upper boundary of its mid-November to present consolidation phase---suggesting
renewed momentum to the upside.
GLD rose ½%, closing
above both MA’s (the 100 DMA is crossing above its 200 DMA---a positive
technical signal) and within very short-term and short-term uptrends.
Bottom line: the Averages paused
yesterday but held up fairly well in the face of some negative headlines. It was a bit disappointing that there wasn’t
additional follow through from Tuesday’s and Wednesday’s move up. But I see no reason why they won’t at least
challenge their prior lower highs.
The dollar, bonds and gold seem to be
attracting ‘safety trade’ investors even though their daily activity is not
always consistent.
Thursday
in the charts.
Fundamental
Headlines
The
dataflow this week continues to be dismal: weekly jobless, November business
inventories/sales and December retail sales were poor while the January PPI
headline and ex food and energy readings were mixed.
As
a caveat to the retail sales (primary indicator) number, the pundit narrative
was dominated by apologists explaining all the reasons why there were
seasonal/technical factors that mitigated its lousy report. Assuming that is true, I think it a stretch to
assume that there wasn’t any bad news in this stat.
Overseas,
the data was somewhat mixed: Q4 EU GDP was in line, Q4 German GDP was short of
estimates; January Chinese exports soared while imports were down.
In
other news:
(1)
Trump decided to sign ‘the wall’/shutdown bill but
apparently intends to declare a national emergency to obtain further funding. That will likely generate yet another
political standoff with the dems.
***overnight,
(2)
China appears to be holding tough on forced technology
transfers.
***overnight, there
was a lot of happy talk from both sides about continuing negotiations. However, Xi made it clear that it didn’t
include IP theft.
(3)
and, last but not least, another Fed official goes
dovish.
Bottom
line: (1) the economic data continues to point to a slowing economy. (2) Trump may sign ‘the wall’/shutdown legislation
but [a] I never thought that this was going to have an impact on the economy and
[b] the political standoff will apparently continue if he declares a national
emergency. (3) I have been a sceptic
regarding any early Chinese capitulation on IP theft. Yesterday’s headline confirms that. I continue to think that the only way there is
a US/Chinese trade agreement is if Trump folds.
(4) Offsetting all this is what
appears to be the re-establishment of the Fed ‘put’. That ‘put’ has been sufficient to overwhelm almost
all negative headlines for the last decade.
While I believe that this too will end, my assumption is that it will
continue until a trigger event stops it.
As
prices move up, my strategy is to Sell Half of any holding when the stock price
enters that Range.
News on Stocks in Our Portfolios
PepsiCo
(NYSE:PEP):
Q4 Non-GAAP EPS of $1.49 in-line; GAAP EPS of $4.83.
Revenue
of $19.52B (-0.1% Y/Y) in-line.
Economics
This Week’s Data
US
November
business inventories fell 0.1% versus expectations of a 0.2% increase; worse,
sales declined 0.3%.
The
February NY Fed manufacturing index came in at 8.8 versus consensus of 7.6.
January
import prices declined 0.5% versus estimates of unchanged; exports prices
dropped 0.6% versus forecasts of up 0.1%.
International
January
Chinese CPI rose 0.5% versus December’s reading of unchanged; PPI was -0.6%
versus -1.0%.
The
January Chinese all-system aggregate financings hit a new high, i.e.
credit/liquidity expansion.
Other
Is
the Fed insolvent?
More
on auto loans (delinquencies).
January
LA port traffic.
Short
money rules.
Latest
on Brexit.
What
I am reading today
Questions and answers
regarding your 2018 tax bill/refund.
Why
you might want to consider not taking social security at 65.
The
Green New Deal.
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