The Morning Call
3/1/19
The
Market
Technical
The Averages
(DJIA 25916, S&P 2784) drifted lower, with the S&P sinking further away
from the critical 2800 level. However,
the current sell off is minor---not what I had expected after the S&P
failed to successfully challenge 2800 for the fourth time. As I noted yesterday, it appears to me that a
battle is being fought between the bulls and bears with 2800 as the line of
demarcation. That or neither bulls or bears have
any conviction.
Volume rose;
breadth weakened.
The VIX was up ½%,
but the chart remains quite negative---a plus for stocks.
The long bond (120.02)
declined another ½ %, again on decent volume.
While it still has positive upward momentum, it is losing it fast and
drew closer to the 119.0 support level. The
question of whether it has made a triple top looms larger?
And.
The dollar rose
two cents, continuing to trade in a very narrow range---indicative of little directional
conviction. Still it finished above both
MA’s and within a short-term uptrend.
GLD was down another
½ %. That is typical when the long bond
is weak (interest rates rising) especially in an improving economy.
Bottom line: the
Averages did very little, with the S&P remaining below the 2800 resistance level. While neither have been able to advance on
good news (trade and Fed), there also hasn’t been any significant ‘sell the
news’ reaction. That suggests to me that,
short term, investors collectively are divided about what to do next. So, it will likely take some event to push
sentiment in one direction or the other.
Gold’s chart remains strong but
getting less so. If TLT is selling off in
anticipation of a strengthening economy, that would make sense. But if that is the case, the dollar should be
doing better. On the other hand, if, as
the above article suggests, TLT is declining because of rising oil prices
(inflation), then GLD should be strengthening.
So, the seeming uncertainty in the equity market is also present in
other markets.
Thursday
in the charts.
Fundamental
Headlines
Yesterday’s
data was weighed to the positive side: the February Kansas City Fed manufacturing
index was a disappointment, weekly jobless claims were in line and preliminary
Q4 GDP and the February Chicago PMI were both upbeat.
Two
news events:
(1)
Trump walked away from the talks with Un. While it is absorbing a lot of print space and
air time, I am not sure that it will have much effect on the US/global economy. And it is so far down the list of potential geopolitical
crises, I think it largely irrelevant to investor psychology.
And.
(2)
Mnuchin and Kudlow both took to the airwaves, making
more China trade deal happy talk. Maybe
so; but my money is on Lighthizer’s take.
I want to repeat that this doesn’t mean some kind of agreement won’t be
made and that it won’t be a cyclical positive.
I just don’t think it will include a viable solution to the Chinese
industrial policy/IP theft problems.
Bottom line: longer
term, the good news is that the Fed continues to deliver a Market friendly
narrative and, in my opinion, is the most important element in the Markets’
performance; and until something occurs that illuminates the negative economic
consequences of QE, it will likely remain so.
https://www.zerohedge.com/news/2019-02-28/we-are-not-bearish-private-equity-giant-says-its-time-sell
News on Stocks in Our Portfolios
General
Dynamics wins two $1.3 billion contracts.
C.H.
Robinson acquires Space Cargo Group.
Economics
This Week’s Data
US
The
February Chicago PMI came in at 64.7 versus consensus of 56.1.
The February
Kansas City Fed manufacturing index was reported at 1.0 versus the January
reading of 5.0.
December
personal income rose 1.0% versus expectations of +0.4% (but was down 0.1% in
January---the government shutdown resulted in reporting personal income in both
December and January, but January personal spending and the PCE price index
were not reported); personal spending fell 0.5% versus forecasts of -0.3%; the
PCE price index was up 0.1% versus projections of unchanged.
International
The
January Japanese unemployment rate was 2.5% versus December’s reading of 2.4%.
The
February Japanese manufacturing PMI came in at 48.9 (contraction) versus
January’s 50.3 report.
The
February Chinese manufacturing PMI was 49.9 versus January’s 48.2 reading.
The
February EU manufacturing PMI was reported at 49.3 versus estimates of 49.2.
The
January EU unemployment rate was 7.8% versus forecasts of 7.9%
Other
What
I am reading today
How
much free time do the happiest people have?
Exploiting the pendulum
of investor psychology.
Quick
thinking leads to bad behavior.
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