The Morning Call
4/3/19
The
Market
Technical
The Averages
(DJIA 26179, S&P 2867) rested yesterday---the S&P was flat and the Dow
down slightly. The S&P finished
above 2800/2811/2815 level and above its prior high for a second day, reestablishing
a very short term uptrend. The Dow broke
above the upper boundary of its very short term downtrend for a second day,
voiding that trend. However, the pin
action in the dollar and the long bond still are a minus. Further, both indices gapped up on the open
Monday and that is likely to be closed. My
assumption now is that the indices will challenge their all-time highs; but
there are enough negatives that I doubt a successful challenge of those resistance
levels.
Volume fell. Breadth was mixed.
The VIX declined
seven cents, ending below its double bottom---a plus for stocks, though there
is the potential that it could be building an inverse head and shoulders (a
negative). With gap opens in most of our
indicators, it is somewhat surprising that the VIX is being so docile.
The long bond recovered
some of the loss from Monday’s negative pin action. The chart remains strong---in a very short
term uptrend and above MA’s. However,
the gap open two Friday’s ago needs to be closed and that hasn’t happened
yet. So, more downside would not be
surprising.
The dollar was
up three 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.
GLD increased
3/8%. It is still in a solid uptrend and
Thursday’s gap down open needs to be closed but continues to develop a head and
shoulders pattern.
Bottom line: the
pin action in the Averages continues to improve. It appears that they have broken away from 2800/2811/2815
resistance and are headed for their all-time highs. However, there is enough negatives coming
from other indicators to create some doubt about the strength of any upward
momentum.
TLT and UUP
continue to point to lower interest rates/a weaker economy. GLD is taking a hit from the strong dollar.
Tuesday in the
charts.
Ninety years of
golden crosses.
Fundamental
Headlines
Yesterday’s
economic data was mixed: February durable goods orders were mixed, month to
date retail chain store sales were disappointing though March light vehicle
sales were better than expected.
Overseas,
one stat: February EU PPI was in line.
As
the crisis on the southern border intensifies, Trump is considering shutting down
the border with Mexico. Forgetting the humanitarian
aspects, the economic consequences could be significant. One billion dollars of goods cross that
border every day. That is not chump
change. However, there has been a lot of
waffling on exactly what ‘shutting down the border’ means. Indeed, administration officials are already trying
to figure out how a closing could be executed without impacting trade. In other words, they realize what a bad idea
it is. In short, it seems likely that
this another one of those threats that Trump throws out when he is seeking leverage
to accomplish a goal, but gets walked back when the full consequences become apparent.
***overnight,
reports circulated that all the major points in the US/China trade negotiations
had been settled, except, that is, the enforcement mechanism to insure a fairer
Chinese industrial policy and prevent IP theft.
Certainly, just having the Chinese admit that they have cheated is a
step forward. But the devil is always in
the details.
Bottom
line: in the very short term, I think that the Market technicals will play a significant
role in price direction. Longer term, the
impact, or lack thereof. of the dataflow on monetary policy will be the
determinate. If the globe is slowing/going
into recession, the central banks will most likely ease; the question is what
happens when they do and that has no impact on the economy (i.e. growth
continues to slow or there is a recession); what will investors? If the global economy recovers, will central banks
tightened and how will investors react to that?
Of course, the economy can recover and the central banks remain
easy. We all know what happens then.
More
on valuations.
March
dividends by the numbers.
News on Stocks in Our Portfolios
Economics
This Week’s Data
US
Month
to date retail chain store sales rose more slowly than in the prior week.
March
light vehicle sales were 17.5 million units versus expectations of 16.8
million.
Weekly
mortgage applications soared 18.6% while purchase applications were up 3.0%.
The
March ADP private payroll report showed job gains of 129,000 versus an
anticipated increase of 170,000.
International
The
March Chinese Caixin services PMI came in at 54.4 versus estimates of 52.3; the
composite PMI was 52.9 versus 50.0.
The
March Japanese services PMI was reported at 52.0 versus forecasts of 52.1.
The
March EU services PMI was 53.3 versus consensus of 52.7; the composite PMI was
51.6 versus 51.3.
February
EU retail sales rose 0.4% versus projections of up 0.2%.
Other
JP
Morgan’s March global manufacturing PMI was unchanged from February.
Q1 US mall
vacancy rate rose sharply.
US/EU
trade talks face delay.
The
government is a check-writing, wealth redistribution machine.
What
I am reading today
How
to be less wrong.
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