The Morning Call
4/17/19
The
Market
Technical
The Averages
(DJIA 26452, S&P 2907) inched higher on improved volume and breadth. The S&P’s pin action remains almost
perfect. The Dow ended above its prior
high; if it remains there through the close today, it will reestablish a very
short term uptrend. I continue to believe that they will almost
surely hold their momentum long enough to challenge their all-time highs.
But, there are two potential negatives that I
discussed in last weekend’s Closing Bell: (1) both indices made a second gap up
open on Friday. Meaning they now have
two gap up opens exerting restrain on the upside, (2) while the recent drawdown
in the VIX would normally be a plus for stocks, it has now reached a level that
puts it near an all-time low.
Historically, this has been a signal that stock prices are getting
stretched.
The long bond fell
5/8 % on volume, closing near the lower boundary of its very short term uptrend
and above MA’s.
The dollar was
up ¼%. So, it remains in a solid
uptrend. The only thing I can see wrong
with this chart is that it needs to trade meaningfully above its prior high.
GLD was hammered
again (down 1%), falling below its 100 DMA/triple bottom. If it remains there through the close on
Thursday, the 100 DMA will revert to resistance and the downside objective established
by it head and shoulders will be roughly the lower boundary of its short term
uptrend. Clearly, this chart is deteriorating.
Bottom line: after
a period of inconsistent pin action among the Markets, the emerging narrative across
all of them appears to be improving economic growth and higher interest rates. It is a bit early to feel comfortable with
this scenario; but the signs are there.
Tuesday
in the charts.
Fundamental
Headlines
Yesterday’s
economic stats were mixed: month to date retail chain store sales were upbeat, March
industrial production disappointed and the April housing market index was in
line.
Overseas,
the data was positive: February EU construction spending and economic sentiment
were above estimates while the February UK unemployment rate was in line.
Bottom
line: as I noted above, it seems like the investing world is starting to focus on
the consensus view that the worst, economically speaking, is behind us. The major driving forces are:
(1) an earnings
season that is unfolding much more positively than anticipated,
(2) all things
China:
[a]
the huge liquidity infusion by the Bank of China,
[b] the
continuing flow of major surprises in its economic releases. As you know, I have been skeptical about the
veracity of these numbers largely because it doesn’t seem to be reflected in
the data from the rest of the world {see below}. So, I am either dead wrong or everyone else wants
to believe. At the moment, I have to
assume the former.
[c] the making
of a trade deal with the US. The more
details we get, the more I believe that it will be a disappointment for secular
growth. Not that it will be a negative;
just that it won’t rectify the principal Chinese unfair trading practices---so,
as I said yesterday, it seems like nothing much will really change from the
period before we went through all this agony.
That said, if the recent tariffs imposed by both parties are eliminated
and China resumes its agricultural and energy imports from the US, then clearly
that will be a cyclical positive.
Update
on big four indicators.
News on Stocks in Our Portfolios
Qualcomm
and Apple settle litigation (we own both).
Revenue of $12.88B (+2.5%
Y/Y) beats by $200M.
Economics
This Week’s Data
US
Month
to date retail chain store sales grew faster than in the prior week.
March
industrial production declined 0.1% versus estimates of +0.2%.
The
April housing market index came in at 63, in line.
Weekly mortgage
applications declined 3.5% while purchase applications were up 0.9%.
The
February trade deficit was $49.4 billion versus consensus of $53.5 billion.
International
March
Chinese fixed asset investments were up 6.3%, in line; industrial production was
up 8.5% versus expectations of +5.9%; retail sales +8.7% versus +8.4%; Q1 GDP
+1.4%, in line.
February
Japanese industrial production rose 0.7% versus forecasts of up 1.4% while capacity
utilization increased 1.0% versus -0.4%.
February
EU trade balance was +15.5 billion versus projections of +E17.2 billion; CPI
was +1.0%, in line.
March
UK PPI was flat versus consensus of +0.1%; core PPI was +0.2% versus +0.3%.
Other
The Fed needs reforming.
https://www.washingtontimes.com/news/2019/apr/15/it-may-be-too-late-for-the-federal-reserve-bank-th/
Here is apparently what is going inside
the Fed. If anyone believes this pedantic
bulls**t has a snowball’s chance in hell of working, I have a bridge for sale.
Will rising oil prices lead to
higher inflation?
On line lenders preparing for a
recession.
Where inflation is hiding.
Container board volumes decline
markedly.
Pentagon bookkeeping is a
disaster.
https://www.zerohedge.com/news/2019-04-16/pentagons-bookkeeping-atrocious-books-are-wrong-everything
What bothers Greenspan.
What
I am reading today
The problem with making tax returns
public.
The
will to survive.
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