The Morning Call
2/12/19
The
Market
Technical
The Averages
(DJIA 25053, S&P 2709) had a mixed day (Dow down, S&P up). Their pin action versus their MA’s is at odds: the Dow is below its 100 DMA (after a failed
challenge) and right on its 200 DMA; the S&P is above its 100 DMA and below
its 200 DMA. Both recently voided their
very short term uptrends, were unable to surpass their prior lower highs but
remain in short term trading ranges.
Volume declined;
breadth was weak.
The VIX was up 1
½%, finishing below both MA’s (now resistance) but in a short term uptrend.
The long bond
was down, but remained above both MA’s, in short and intermediate-term trading
ranges and in a very short-term uptrend.
The dollar advanced,
closing above both MA’s, in a short-term uptrend and at the upper boundary of that
mid-November to present consolidation phase.
GLD was down, but
still ended well above both MA’s, within very short-term and short-term uptrends.
Bottom line: the Averages have voided
their very short term uptrends and stalled at the levels of their MA’s,
suggesting that they have lost upward momentum.
I am not inferring some dramatic selloff (though as you know, I think
that there is one in our not too distant future); rather some weakness to test
recent support levels. At the moment, I
am watching to see if indices can trade above their prior lower highs or if
they decide to challenge their late December lows.
How the Markets
handle the positive overnight news (see below) should give us some directional
information.
The dollar, bonds and gold seem to be
attracting ‘safety trade’ investors even though their daily activity is not
always consistent.
Monday
in the charts.
Fundamental
Headlines
No
US economic data releases yesterday.
Overseas, we got a few negative stats out of the UK which I give less
emphasis to than EU numbers due to the uncertainty surrounding the Brexit
issue.
I
noted in yesterday’s Morning Call, the recent return of the Fed put. That may make the Markets happy for a short
time. However, the problem is that the
Fed has raised rates and shrunk its balance sheet so little, that there is not
much room for monetary stimulus if the global (US?) economy rolls over.
And:
I
also mentioned that that fourth quarter earnings/first quarter guidance has
been disappointing. Morgan Stanley
addressed that issue yesterday.
Bottom
line: the US economy is slowing (not declining) while the rest of the world
appears to be decelerating at a much more rapid pace. I continue to believe that the US can avoid a
recession though that may not make any difference if corporate earnings fall as
many increasingly believe that they will.
Fed
policy remains a problem. Either it will
continue to shrink its balance sheet which will do little to harm the economy
but induce pain for the Markets; or it will continue kowtow to the Market and then
be forced to admit that it has little ammo when, as and if it can no longer
ignore the fact that the economy is not doing half as well as it has been
pretending.
The
latest most crowded trade.
***overnight,
(1)
congressional leaders have apparently reached a
compromise on the border wall funding/government shutdown issue [though the
funds for building ‘the wall’ are woefully short of Trump’s demands]
(2)
Trump again said that he wants a meeting with Xi to
resolve trade issues
News on Stocks in Our Portfolios
Economics
This Week’s Data
US
The
January small business optimism index was reported at 101.2 versus estimates of
103.0
International
Other
Why
the US debt will continue to rise. This
is a bit long but addresses the issue on which I keep harping---the increase
level of debt constrains economic growth.
The
February business cycle chart book.
A
new fight in Italy; this time over who owns the country’s gold reserves.
Two
Chinese industrial giants are now in default.
While
Deutschebank has its own problems.
What
I am reading today
1000 scientists have
signed a dissent questioning Darwin theory of evolution.
This year’s tax refunds
may not be as big as many think.
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