The Morning Call
4/4/19
The
Market
Technical
The Averages
(DJIA 26218, S&P 2873) advanced modestly yesterday. Having overcome very short term negatives on
Tuesday, there is no resistance between current prices and their all-time
highs. So, my assumption is that the
indices will challenge those highs; but there are still negatives that may
inhibit momentum---the pin action in the dollar and bonds as well as Monday’s
gap up open (that will likely be closed.
Volume rose
slightly. Breadth remained mixed.
The VIX was up 2
¾ % (a bit unusual for an up stock price day), ending back above its double
bottom and the first step in building an inverse head and shoulders (a
negative).
The long bond got
clocked again, though its chart remains strong---in a very short term uptrend
and above MA’s. However, it is now starting
to close that gap open of two Friday’s ago. More downside would not be
surprising.
The dollar was down
four cents. It remains above the upper boundary of the November to present
trading range (a move above its prior high would put this trading range in the
dust bin; but it still hasn’t happened), above both MA’s and in a short term
uptrend. The bad news is that it gapped
up on last Wednesday’s open and that needs closing.
GLD fell slightly. It is still in a solid uptrend and Thursday’s
gap down open needs to be closed; but it continues to develop a head and
shoulders pattern.
Bottom line: the
pin action in the Averages continues to improve; and they are likely headed for
their all-time highs. However, there is
enough negatives coming from other indicators (not the least of which is Monday’s
gap up open) to create some doubt about the strength of any upward momentum.
Wednesday in the
charts.
Fundamental
Headlines
Yesterday’s
numbers were tilted to the plus side: the March Markit services and composite PMI’s
better than consensus while mortgage and purchase applications soared; on the other
hand, the March ISM nonmanufacturing index and the March ADP private payroll
report were disappointing.
Overseas,
China continued to report upbeat data.
The March Chinese Caixin services and composite PMI’s were above forecasts. The EU also turned in positive reports: its
March services and composite PMI’s were ahead of expectations while February
retail sales were strong. The March Japanese
services PMI was slightly below estimates.
The
international economic dataflow thus far this week has improved, especially
from China. While it is way too soon to
assume a change in trend, it still must be noted. As
always, follow through is what counts. Remember,
I said the same thing about a month ago regarding better US numbers which then quickly
faded. More information (suggesting the
Chinese data veracity may be in question?):
Japan
struggles as Chinese economy slows.
German
Institute cuts GDP growth forecast in half.
Italy slashes 2019 growth
outlook.
Other
news:
The
latest rumor on China trade talks is that the US will give the Chinese until
2025 to comply with any agreement on industrial policy and IP theft. If true (operative words), it will
undoubtedly have a positive short term effect on trade volume/economic growth,
assuming tariffs are lifted. But the end
result would be just as I feared---Trump gets out maneuvered for the sake of
making a deal which in the end fails to address the major aspects of China’s
unfair trade practices.
The roller coaster
rhetoric on closing the border.
Bottom
line: the question is how real is the data out of China? I said that I have to accept it as credible; however,
the key will be whether the improvement shows up in the stats from other countries
that are its major trading partners. So
far, it hasn’t. But it is way too soon
to assume that it won’t.
The
latest rumor (operative word) on the terms of the US/China trade deal are extremely
disappointing. If anything close to this
outcome occurs, it will be a negative for the long term secular growth of the US
economy. Yes, there will likely be a
short term cyclical impact as trade expands.
But a lot of time will have been wasted and, at least for me, a lot of
Trump credibility will be destroyed.
News on Stocks in Our Portfolios
Economics
This Week’s Data
US
The March Markit
services PMI was 54.6 versus expectations of 54.3; the composite PMI was 55.3
versus 54.8.
The March ISM
nonmanufacturing index was 56.1 versus estimates of 58.0.
Weekly jobless claims
fell 10,000 versus forecasts of a rise of 4,000.
International
February German
factory orders dropped 4.2% versus consensus of +.3%.
Other
Median
new home prices continue to decline.
Light
vehicle sales per capita.
The
decade of deleveraging….or not.
Sheila
Bair on student loans.
World
Trade Organization says global will likely continue to slow.
What
I am reading today
10
common myths about getting older.
Another
great letter from Howard Marks.
Productivity
is about attention management.
What is behind Bitcoin’s surge?
Quote of the day.
Visit Investing
for Survival’s website (http://investingforsurvival.com/home)
to learn more about our Investment Strategy, Prices Disciplines and Subscriber
Service.
No comments:
Post a Comment