The Morning Call
3/11/19
I forgot to tell you Friday that
I had grandchildren coming to town. The
Closing Bell will be back this week.
The
Market
Technical
The
S&P couldn’t successfully challenge 2800 for the fourth time. In addition, it couldn’t hold above an
initial minor support level and is now challenging its 200 DMA (now support);
if it remains there through the close on Wednesday, the trend will revert to
resistance.
This
is a 30 minute video on where we are in the Market from one of my favorite
technical analysts.
The long bond
had a great week, reversing much of the prior week’s poor pin action. On the plus side, the 100 DMA is crossing
above of its 200 DMA. Nonetheless, it remains
in a trading range marked by a double bottom and a triple top. A successful challenge of one or the other of
these boundaries will likely be the directional determinant.
The
dollar had a good week. It is above both
MA’s, in a short term uptrend and has broken out of the November to present
trading range. The only negative is
Thursday’s gap open, which invariably gets closed.
GLD
took it in the chops the prior Friday, did nothing all week, then rallied hard
on volume on this Friday. While it
voided its very short term uptrend, it held above a support level, both MA’s
and remains within a short term uptrend.
All in all, a good performance.
The
bad news for stocks is that the VIX has bounced twice off a bottom; the good
news is that it tried to challenge its 200 DMA twice and failed. A break of one or the other of these barriers
should provide directional guidance.
Fundamental
Headlines
The data flow last week was quite negative:
above estimates: December new home sales, January housing starts, the February
ISM nonmanufacturing index; below estimates: weekly mortgage/purchase
applications, February nonfarm payrolls, the February/revised January ADP
private payroll report, month to date retail chains store sales, February light
vehicle sales, the February Market services PMI, December construction
spending, the January/YTD budget deficit, the December trade deficit; in line
with estimates: January consumer credit.
The primary
indicators were balanced: December new home sales (+), January housing starts
(+), February nonfarm payrolls (-), December construction spending (-). Given the large differential in the
positive/negative total data, I rate the week a negative. Score: in the last 178 weeks, fifty-seven positive,
eighty-one negative and forty neutral.
Overseas, the numbers
were mixed: January EU retail sales, the February EU composite and services
PMI’s, the February UK services PMI were better than anticipated while the
February UK construction PMI, January EU PPI (hotter than expected), German
manufacturing orders and the February Chinese trade surplus were worse; Q4 EU
GDP was in line.
Bottom
line: given the prior two weeks datapoints, I was hopeful that the February
stats were pointing to stabilization in the economic growth. This week’s numbers didn’t help that cause. Nor
do the continuing lousy stats from the rest of the world. While I haven’t given up, my forecast remains
unchanged: a sluggish economy hampered by lousy fiscal and monetary policies.
The
other major headlines last week were:
The
ECB joining the stampede to smother the world with money. That will likely keep stock prices on an
upward trajectory, though (1) in my opinion, it will do little to help the
global economy and (2) sooner or later, [a] all the liquidity could lead to
inflation which the central banks will then have to let continue or be forced
to tighten irrespective of Market sentiment or [b] the world economy will be
unresponsive to QE, drift further toward recession and expose QE for what it
is---a sham.
Despite
the endless barrage of trade happy talk, two scenarios appear to be emerging
through the bulls**t: (1) a deal in which the Chinese don’t relent on their
industrial and IP theft policies [OK on a cyclical basis; bad on a secular one]
or (2) no deal [bad, period].
News on Stocks in Our Portfolios
The board of Medtronic (NYSE:MDT) has authorized repurchase of an
additional $6B of its common stock. It had $1.3B remaining under its June 2017
authorization at the end of the last fiscal quarter.
Economics
This Week’s Data
US
January
retail sales rose 0.2% versus expectations of up 0.1%; ex auto, they were up
1.2% versus estimates of +0.4%---December was revised from -1.2% to -1.6%.
International
Other
February
Chinese credit grow reversed to the downside.
Saudi
Arabia continues production cuts.
What
I am reading today
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