The Morning Call
4/30/19
The
Market
Technical
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.
Fundamental
Headlines
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.
Revenue of C$3.54B (+11.0%
Y/Y) beats by C$60M.
Canadian National Railway (NYSE:CNI) declares CAD 0.5375/share quarterly dividend, in line with
previous.
Revenue of $3.89B (+8.7%
Y/Y) beats by $30M.
Revenue of $4.96B (-3.5%
Y/Y) beats by $20M.
Revenue of $6B (+7.1% Y/Y) beats by $200M.
Economics
This Week’s Data
US
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.
International
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%.
Other
From
my favorite optimist.
The
Econbrowser’s recession indicator.
Counterpoint.
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.
Four behavioral biases.
The terrifying potential of 5G.
Fearing
the dramatic.
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for Survival’s website (http://investingforsurvival.com/home)
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