The Morning Call
4/12/19
The
Market
Technical
The Averages
(DJIA 26143, S&P 2888) took another rest yesterday. The Dow traded below the lower boundary of
its very short term uptrend (the S&P did not). But that is the only cloud in an otherwise
quite positive setup. So, I continue to
believe that they will advance toward their all- time highs (26951/2942). There are still negatives that may inhibit
momentum (which indeed seems to have slowed in the last week)---the pin action
in the dollar and bonds as well as last Monday’s gap up open (that will likely
be closed).
Volume up fractionally;
and breadth was again mixed.
The VIX dropped
2 %, finishing back below the triple bottom.
This is plus for stocks.
The long bond
was down ½ %, but still looks strong---in a very short term uptrend and above
MA’s. However, it has yet to close that
gap open of three Friday’s ago. More downside would not be surprising.
The dollar jumped
3/8 %. 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
1 ¼ % on volume, creating another gap down open. It appears caught in a trading range defined
by the double bottom/100DMA on the downside and a very short term downtrend on
the upside. Plus, it continues to
develop a head and shoulders pattern. So,
its positive bias is close to being challenged
Bottom line: the
upward momentum in the indices continues which I believe will take them to
their prior all-time highs. UUP, TLT and
GLD all had big moves and their pin action suggested a stronger economy/higher
interest rates. Of course, that is one
day’s performance.
Thursday
in the charts.
Fundamental
Headlines
Yesterday’s
economic stats were once again slightly positive: the March budget deficit and
weekly jobless claims were upbeat while March PPI came in much higher than
anticipated.
Overseas,
China continues its Alice in Wonderland data surge with March CPI falling much
more than expected; March German CPI was in line.
US/China
continue to hammer out a deal. The good
news is that the Chinese are finally admitting that they have been cheating---a
critical first step in correcting that behavior. What is uncertain is the timing of compliance
(2025 still appears to be in play) and whether tariffs stay in force until it
is achieved. Still, absent more details,
progress is positive.
***overnight,
EU/China sign major trade deal.
In
addition, while only a couple of days into first quarter earnings season, the results
so far have been a big plus. Almost 84%
of those reporting are beating estimates and a large percentage of those are
beating by a big margin. At the risk of
sounding cynical, I think what this means is that analysts had panicked in
fourth quarter, lowered their profit forecasts too much and now, while earnings
are lower, they just aren’t as low as the fourth quarter revisions had
them. Still I think that this is good
news. My forecast is that the current
slowdown will not turn ugly, so this would be a good sign that it has not.
***JP Morgan (the
first major company to release earnings) just reported first quarter earnings,
well ahead of estimates.
Bottom
line: all in all a very positive day in terms of the news flow. It seems like a little better pin action
might have been in order. But as I noted
above, this latest spike up is getting a bit tired (losing momentum), so a rest
is not surprising even in the face of good news.
Speaking
of which, the narrative on the US/China trade deal continues positive. (What else would you expect from the White
House?) Whatever the outcome, just having
the Chinese own up to their unfair trading practices is a big step. At least, now the conversation can focus on
how to correct them. That, of course,
doesn’t mean the US will get very far in changing them. I am worried that this rumored 2025 compliance
deadline is just a ploy to allow the Donald to declare victory and provide the
Chinese an escape hatch from compliance.
If
this earnings season ends as it began, it will be another great example of the
Wall Street earnings game in which estimates are made to be beaten.
Did
the FOMC minutes read even more hawkish than generally accepted?
The
latest from Lacy Hunt.
The
latest (must read) from Jeff Gundlach.
News on Stocks in Our Portfolios
Economics
This Week’s Data
US
March
export prices rose 0.7% versus consensus of +0.2%; import prices were up 0.6%
versus +0.4%.
International
March
Chinese exports soared 14.2% while imports declined 7.1%.
March
Chinese social lending (credit growth) was 64% above estimates.
February
EU industrial production fell 0.2% versus expectations of -0.6%.
Other
What
I am reading today
You
should save like you are going to retire early.
Why failure isn’t failure.
Quote of the day.
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