Tuesday, April 2, 2019

The Morning Call--On the way to all-time highs?

The Morning Call


The Market
The Averages (DJIA 26258, S&P 2867) did a moonshot yesterday.  The S&P finished above 2800/2811/2815 level and above its prior high; if it remains there through the close today, it will reestablish a very short term uptrend.  The Dow broke above the upper boundary of its very short term downtrend; if it remains there through the close today, that trend will be voided.  So that negative is about to be removed.  However, the pin action in the dollar and the long bond still are a minus.  Further, both indices gapped up on the open.  Nonetheless, a good price performance today and the assumption has to be that the indices will challenge their all-time highs.

Volume rose.  Breadth improved, although flow of funds indicator was flat.

The VIX declined 2 ¼ %, ending right on the lower boundary of the trading range marked by the 200 DMA on the upside and the double bottom on the downside---whose violation would be a plus for stocks.  With gap opens in most of our indicators, it is somewhat surprising that the VIX is being so docile.

The long bond was pounded down by 1 5/8% on volume.  It remains in a very short term uptrend and above MA’s.  I have pointed out that the gap open two Friday’s ago needed to be closed and that hasn’t happened yet.  So, a decline is not surprising.

                More defaults on the way.

The dollar fell two cents on volume. The good news is that 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), above both MA’s and in a short term uptrend.  The bad news is that it gapped up on last Wednesday’s open.

GLD declined 3/8%, moving closer to the minor double bottom and continuing to develop a head and shoulders pattern.  The good news is that it is still in a solid uptrend and Thursday’s gap down open needs to be closed. 

Bottom line: yesterday’s strong follow through by the indices enhances the probability that they are headed for their all-time highs.  However, there is enough negatives coming from other indicators to question whether or not they can successfully challenge those levels.

TLT and UUP continue to point to lower interest rates/a weaker economy.  GLD is taking a hit from the strong dollar.

            Monday in the charts.



            Yesterday was a big data day.  In the US, February construction spending and the March ISM manufacturing index were better than anticipated; however, January business inventories/sales, February retail sales and the March Markit manufacturing PMI were disappointing.

            Overseas, Q1 Japanese manufacturing index and all industry were below estimates, the nonmanufacturing index was in line while the March manufacturing index was better than forecast. 

The March EU manufacturing PMI and inflation sell short of consensus while unemployment was in line.

The March Chinese manufacturing PMI, the Caixin (small business) manufacturing PMI, the nonmanufacturing PMI were all better than expected.  As you know, I think that there is reason to doubt the veracity of these numbers.  Although I will count them as a plus.
            A skeptic on the China PMI number.

            Bottom line: even if one assumes that the Chinese numbers are entirely credible, in totality, yesterday’s dataflow was negative.  Given the ecstatic Market responds, that seems to again confirm that if the global central banks are easing, stock prices are going up.   I sit back and enjoy it for the 50% of my portfolio invested in equities.  I feel very comforted by the 50% that isn’t.

            The latest from Morgan Stanley.


                        What if the bull market ended 14 months ago?

            Update on valuations.

    News on Stocks in Our Portfolios


   This Week’s Data


            The March ISM manufacturing index was 55.3 versus expectations of 54.5.

            The March Markit manufacturing PMI was 52.4 versus estimates of 52.5.

            February construction spending rose 1.0% versus forecasts of -0.2%.
            January business inventories were up 0.8% versus consensus of +0.5%; however, sales again trailed, up only 0.3%.

            February durable goods orders fell 1.6% versus projections of -1.8%; ex transportation, they rose 0.1% versus +0.2%.


February EU PPI was up 0.1%, in line.


            Zombie companies.

            Two years of ‘winning’.

            Brexit update.

What I am reading today

            The psychological dangers of a sedentary life (great read).

            Real estate versus the stock market.

            NASA mission searching for planets most likely to sustain life,

            Quote of the day.

                        Bitcoin surges.

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