The Morning Call
3/29/19
The
Market
Technical
The Averages
(DJIA 25717, S&P 2815) ended higher on the day, though the S&P closed below
the lower boundary of its very short term uptrend for a second day, voiding
that trend. However, it remained above
2800/2811 and right on the 2815 level. Clearly,
it is holding above my designated support level 2800 but is struggling in the
2811/2815 zone. On the plus side, the
S&P has spent the bulk of the time in the 2800/2811/2815 threshold at the
upper end or above it/them. That weighs
in favor of a upside break. However,
volume, breadth and the pin action in the Dow, the dollar and the long bond are
negatives. Follow through.
Volume declined
and breadth finally improved.
The VIX declined
4 ¾ %, leaving it at about the mid-point between a double bottom and its 200 DMA---offering
little informational value.
The long bond was
up 3/8 %. The good news is that it is maintaining
its upward momentum and move toward its all-time high. The bad news is that last Friday’s gap up open
still needs to be closed.
https://www.zerohedge.com/news/2019-03-28/stellar-demand-7y-paper-which-prices-lowest-yield-nov-2017
The dollar rose 3/8
%. The good news is that it remains above the upper boundary of the November to
present trading range, above both MA’s and in a short term uptrend. The bad news is that yesterday was a gap up open.
GLD was down 1 ½
%. The good news is that it is in a solid
uptrend and yesterday was a gap down open.
The bad news is that it is nearing a former minor double bottom.
Bottom line: certainly
on a price basis, it looks like the probability of the S&P moving higher is
greater than the odds of a failure to sustain the 2800/2811/2815 level. However, many other indicators suggest otherwise.
So, I continue to await follow through.
TLT and UUP continue
to point to lower interest rates/a weaker economy. GLD is taking a hit from the strong dollar.
Thursday
in the charts.
Fundamental
Headlines
Yesterday’s
economic data weighed to the negative side: Q4 GDP, price deflator and corporate
profits and February pending home sales were disappointing while weekly jobless
claims and the March Kansas City Fed manufacturing index were better than
anticipated.
Ditto
overseas: March EU business confidence, industrial sentiment and economic
sentiment indices were below projections while consumer confidence index was in
line (-7.2).
This
doesn’t raise confidence---concerning rhetoric from the BIS and IMF (must read):
More
speculation on the US/China trade deal.
EU embraces China’s ‘belt
and road initiative’.
Bottom
line: the possibility of a trade deal with China remains uncertain; but a favorable
resolution would be undoubtedly be a plus for long term secular growth. However, if it were signed, sealed and delivered
today, it may be too late to help the potential cyclical growth problem facing
the US and the rest of the world. Certainly,
the dataflow is pointing to further deceleration in growth and perhaps
recession; and bond and dollar investors are clearly concerned.
A key to the
outcome is whether or not the central banks have the ammo to counter such a
development; and even if they do, whether they can use it effectively. On the latter, history says that they won’t. This time may be different. Equity investors believe that it is. So, until, as and if they are disabused of
that notion, stock prices will likely continue to rise. If so, I will continue to make sales of any
stock that trades into its Sell Half Range.
The
decline in yields is just a start.
Finally.
News on Stocks in Our Portfolios
Economics
This Week’s Data
US
February
pending home sales fell 1.0% versus expectations of a 0.7% increase.
The
March Kansas City Fed manufacturing index came in at 17 versus the February reading
of -4.
The
January PCE (inflation) was -0.1% versus consensus of 0; the core PCE (ex food
and energy) was +0.1 versus +0.2.
January
personal income was up 0.2% versus estimates of up 0.3%; personal spending was
up 0.1% versus up 0.3%.
International
March
Japanese CPI rose 0.9% versus projections of +0.5%.
February
Japanese unemployment rate was 2.3% versus expectations of 2.5%; industrial
production was +1.4% versus +1.0%; retail sales were up 0.2% versus +0.3%; construction orders were
-3.4% versus -4.0%; housing starts were +4.2% versus +0.5%.
February
German retail sales increased 0.9%, in line.
Q4
UK GDP rose 0.2%, in line; business investment fell 0.9% versus forecasts of
-1.4%.
Other
***overnight,
the latest on Brexit.
https://www.zerohedge.com/news/2019-03-29/pound-tumbles-mays-brexit-deal-appears-headed-third-defeat
What
I am reading today
You have nothing to fear
but fear itself.
Reducing the behavior
gap.
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for Survival’s website (http://investingforsurvival.com/home)
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