The Morning Call
4/24/19
The
Market
Technical
So much for more
consolidation. Clearly, last week’s
pause was all Mr. Market needed before the Averages (26656, 2933) resumed their
advance. While volume was up, it was
barely so---and off a very anemic showing on Monday; breadth also improved
though much less than I would have expected.
The Dow closed right on its all-time high (it traded above this level on
an unsuccessful challenge) as well as the lower boundary of its very short term
uptrend. The S&P is still short of
its all-time high (2942), but just slightly.
It also reestablished a very short term uptrend which will be confirmed
if remains there through the close today.
The VIX down
fractionally, certainly not corresponding to a strong move up in stock prices
and indicating that it may be stretched to the downside.
More.
The long bond was
up ¼ %. Nevertheless, it still ended
near the lower boundary of its very short term uptrend. Its chart, at present, is strong; though clearly
voiding its very short term uptrend would raise directional questions.
The dollar rose 3/8%, remaining technically
strong, hitting another high in its advance since early 2018 and is forty cents
away from a twenty year high. In doing
so, it experienced another gap up open, creating a second gap that needs to be
filled. However, as I mentioned
yesterday, doing so would do little damage to its chart.
GLD
was down another ¼%. Its 100 DMA is now resistance and gold appears headed for
the lower boundary of its short term uptrend (seven points lower).
Later.
Bottom line: clearly,
I was wrong thinking stocks would consolidate further. However, the conditions that
gave rise to that assumption haven’t changed: (1) the VIX is reflecting a very
high level of investor complacency, historically a sign of lower stock prices
and (2) the April 1st gap up open still needs to be closed. Further, the 26656/1942 (all-time highs) levels
should pose some, if not a lot of, resistance---meaning that I believe it reasonable
to think that the indices confirming a break above those highs will take some
work.
I
remain a bit confused by the price action of the other indicators that I
follow. The dollar is pointing to a stronger economy/higher interest rates; though
there is very little in the numbers pointing to a stronger economy. The strong dollar explains the poor
performance in gold. However, while the
long bond has been hinting at the stronger economy/higher interest rate
narrative, it has yet to confirm that narrative.
Tuesday
in the charts.
Fundamental
Headlines
The
economic data improved yesterday: month to date retail chain store sales and
(in particular) March new home sales were positive while the April Richmond Fed
manufacturing index was disappointing.
Overseas the April EU flash consumer confidence index was lower than
anticipated.
Bottom
line: the Market was really the story yesterday. And, as we all know, it was a big plus,
notwithstanding scaled back trade hopes, mediocre economic data and saber rattling
in the Persian Gulf. Of course,
universal monetary policy mischief cures a lot of ills.
News on Stocks in Our Portfolios
Economics
This Week’s Data
US
Month to date retail
chain store sales grew faster than in the prior week.
The February
Case Shiller home price index rose 0.3%, in line.
March new home
sales were up 4.5% versus estimates of -2.5%.
The April Richmond
Fed manufacturing index came in at 3 versus forecasts of 10.
Weekly
mortgage applications fell 7.3% while purchase applications were down 4.1%.
International
The April EU flash consumer confidence
index was -7.9 versus expectations of -7.0.
The February Japanese all industry
index came in at -0.2 versus estimates of -0.1.
The February Japanese leading
economic indicators were 97.1 versus consensus of 97.4.
April German business confidence
was reported at 99.2 versus projections of 99.7, while consumer confidence was
10.4 versus 10.7.
Other
Trump’s
Iranian oil gambit.
US/China
trade contracts 9% in first year of trade war.
Auto
sales aren’t nearly as strong as reported.
Money
supply versus demand (must read):
Fed resigned to
asset bubbles.
Who
should Trump pick for the Fed’s Board of Governors?
What
I am reading today
First, the good
news in the 2019 Social Security trustees report.
Now,
the bad news.
Increasing demand for cryptocurrency
payment solutions.
Eliminate student loans.
Fifty years of climate change
predictions.
Controlling what you haven’t thought
of.
Is
diversification for idiots?
How
many stocks should you own in your portfolio?
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