The Morning Call
2/26/19
The
Market
Technical
The Averages
(DJIA 26091, S&P 2796) advanced for another day, though they closed well
off their intraday highs. However, the
S&P ended below the lower boundary of its very short term uptrend; if it
remains there through the close today, that trend will be voided. The Dow voided its very short term uptrend on
Friday. The Dow ended above its prior
lower high (25977); the S&P did not (2800). Indeed, it challenged 2800
intraday and failed for the fourth time---an extremely rare occurrence. It is too soon to make a big deal out of
this; but this pin action has the characteristics of a top. So, follow through is important.
Volume was flat
and breadth was mixed.
The VIX was up
10%. It is unusual for the VIX to be up
on an up Market day; it is even more unusual for it to be up this much. However, still it remains below both MA’s and
in a very short term downtrend.
The long bond fell
¼ %, leaving open the possibility that it has made a triple top.
The dollar was down
two cents, ending above both MA’s and within a short-term uptrend. It remains stuck in that November to present
trading range.
GLD declined
slightly, but its chart remains strong.
Bottom line: while the Averages managed
another up day, yesterday’s pin action along with the strong performance of the
VIX suggests that the current rally may be coming to an end. As I said above, follow through will
determine that. However, even if they
have reached an interim high, that doesn’t mean a major sell off is in the cards.
Gold’s chart remains strong; UUP is
stuck in a range and the long bond may be starting
to suggest that rates could be moving up.
Monday in the charts.
Fundamental
Headlines
Yesterday’s
economic data weighed to the negative: the January Chicago Fed national
activity index and December wholesale inventories/sales were extremely disappointing,
but the February Dallas Fed manufacturing index was much better than expected.
Most
of the Markets’ attention was focused on the news Sunday night that Trump would
delay the March 1st deadline for the imposition of additional tariffs
on Chinese goods. That, in turn, lifted
investors’ optimism that a trade deal will be struck.
Counterpoints:
Trump
is misreading Chinese strengths/weaknesses.
Will
Trump blink?
Also
taking up a lot of space on CNBC was the annual interview with Warren Buffett
after the release of his annual letter to shareholders. One of the segments that stood out to me was the
reversal of his opinion on the US deficit/debt.
Bottom
line: the dataflow is not getting any better.
My concern is rising that my own forecast of sluggish growth may be too
optimistic.
On the other hand, it is becoming
increasingly likely that some sort of trade deal will be struck with the
Chinese. The question is, will it
address Chinese industrial policy and IP theft in a meaningful way or will
there be a lot of ‘further studies’ needed but in the meantime China buys more
soybeans? To be sure, the latter would
be a plus for US growth near term; however, Trump has put the economy through
some unnecessary pain if that is all he gets.
Should
stock buybacks be banned?
Howard
Marks on getting the odds on your side.
On
Friday, the debt ceiling returns.
Most economists
see recession by 2021 (does that mean that we won’t have one?).
News on Stocks in Our Portfolios
Revenue of C$7.61B (+7.3% Y/Y) misses by C$170M.
Bank of Nova Scotia (NYSE:BNS) declares CAD 0.87/share quarterly dividend, 2.4%
increase from prior dividend of CAD 0.85.
Revenue of $26.49B (+10.9% Y/Y) misses by $90M.
Home Depot (NYSE:HD) declares $1.36/share quarterly dividend, 32%
increase from prior dividend of $1.03.
Economics
This Week’s Data
US
December
wholesale inventories rose 1.1% versus expectations of up 0.3%; however, sales
declined 1.0%.
The
February Dallas Fed manufacturing index came in at 13.1 versus estimates of
4.8.
December
housing starts fell 11.2% versus forecasts of being slightly up; however,
building permits were up fractionally versus consensus of a decline of 2.9%.
International
Other
More
nonsense from the Fed.
Update
on student loans.
$8
billion hedge fund using 10x leverage.
May opens door for Brexit
delay.
India
and Pakistan rattle their nuclear swords.
What
I am reading today
Why
smart people don’t necessarily make smart investments.
And Markets have a way of
making one look stupid.
The nothingness value of
cryptocurrencies.
Edge over odds.
Taming
the wild.
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for Survival’s website (http://investingforsurvival.com/home)
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