The Averages (26554, 2943) moved higher, with the S&P finishing above its all-time high (2942). The Dow remains below its comparable level (26656). If the S&P remains above that high (the upper boundary of its short term trading range) through the close on Wednesday, it will reset to an uptrend and clear the way for a move to the upper boundary of its long term uptrend (~3191).
On the other hand, as I continue to point out, there are factors that would suggest some near term consolidation before that occurs: (1) the VIX voiding its very short term downtrend notwithstanding, it continues to reflect a very high level of investor complacency, historically a sign that portends lower stock prices, (2) the April 1st gap up open still needs to be closed and (3) the Dow has yet to successfully challenge its all-time; historically, it is almost impossible for one index to break above a key resistance level and continue to advance without confirmation from the other.
Volume fell; breadth was mixed.
The VIX was up 3%, a little unusual on a day when a major index powers through a key resistance level. However, It could certainly go on to challenge the lower boundary of its short term trading range and perhaps even the lower boundary of its long term trading range (its all-time low). But those are mere points away. So, I am not sure just how much downside there is (how much further investor complacency can be stretched).
The long bond declined 5/8%, bringing it back to within a point of the lower boundary of its very short term uptrend. This is the third attempt to break that uptrend; so, it should gather some support at current levels.
The dollar was down ¼%. Still its chart is quite positive though it has two gap up opens lower down that need to be filled.
GLD was dropped ½ %. Its chart remains broken. Its 100 DMA and the upper boundary of its very short term downtrend represent overhead resistance.
Bottom line: the S&P ended above its all-time but on poor volume, weak breadth and no confirmation from the Dow. Still a challenge is a challenge; and if it holds 2942 through the close on Wednesday, it opens the way to the upper boundary of its long term uptrend.
UUP, TLT and GLD all sold off which doesn’t offer any directional information.
Monday in the charts.
Pay attention to lumber prices.
Yesterday’s dataflow was mixed: March personal spending and the April Dallas Fed manufacturing index were above forecast while March personal income and the PCE indicator were disappointing.
Real disposable income per capita.
Saving rate declines.
Update on big four economic indicators.
Overseas, April EU business confidence, industrial sentiment and economic sentiment were below expectations while consumer confidence was in line and services sentiment was better than estimates.
Other than the numbers, it was a quiet day; though investors are starting to focus on this week’s Fed meeting. There are some expectations that it will cut rates as much as 50 basis points (but, but, but I thought Q1 GDP was up 3.2%). But the pin action in TLT yesterday suggests that the bond boys aren’t buying it.
Bottom line: I noted in the last Closing Bell that the Q1 GDP report warranted a close examination of my 2019 forecast for economic growth with a view to raising it. However, I also said that before making that change, I wanted to see more positive supporting evidence which would include an improvement in individual statistical components that we get daily. Yesterday’s data didn’t help---declining growth in personal income and a rise in personal spending accompanied by a decreasing saving rate.
Still, the Fed/monetary policy remains, in my opinion, the key to Market direction; and at the moment, there is every reason to think that it will continue to let the Markets tell it what to do.
For the bears.
Low inflation is boosting stock prices for the wrong reasons.
News on Stocks in Our Portfolios
Canadian National Railway (NYSE:CNI): Q1 Non-GAAP EPS of C$1.17 misses by C$0.02; GAAP EPS of C$1.08.
Canadian National Railway (NYSE:CNI) declares CAD 0.5375/share quarterly dividend, in line with previous.
Mastercard (NYSE:MA): Q1 Non-GAAP EPS of $1.78 ; GAAP EPS of $1.80 .
McDonald's (NYSE:MCD): Q1 Non-GAAP EPS of $1.78 ; GAAP EPS of $1.72.
Cummins (NYSE:CMI): Q1 GAAP EPS of $4.20 .
Becton, Dickinson (NYSE:BDX) declares $0.77/share quarterly dividend, in line with previous.
This Week’s Data
The April Dallas Fed manufacturing index was reported at +2.0 versus estimates of -2.6.
The Q1 employment cost index rose 0.7%, in line.
The April Chinese manufacturing PMI came in at 50.1 versus expectations of 50.5; the nonmanufacturing index 54.5 versus 55.0; the Caixin (small business) manufacturing index was 50.2 versus 51.0.
Q1 EU flash GDP growth was 0.4% versus forecasts of 0.3%.
From my favorite optimist.
The Econbrowser’s recession indicator.
A lesson from Argentina.
Bad loans at Chinese banks are growing.
What I am reading today
Boomers are facing a financial (retirement) crisis.
The downside to a reverse mortgage.
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