The Morning Call
4/25/19
The
Market
Technical
After a making
an attempt to challenge their all-time highs on Tuesday, the Averages (26597,
2927) rested yesterday. Volume was down
and breadth weak. The Dow fell back from
its all-time high and ended below the lower boundary of its very short term
uptrend (if it remains there through the close today, it will void that
trend). The S&P tried to approach
its all-time high for a second day, but finished lower. It failed to re-establish a very short term
uptrend.
The VIX was up
7%, ending above the upper boundary of its very short term downtrend; if it
remains there through the close today, it will void that trend. This is the first sign in some time that
investors are being aroused from their complacency.
The long bond
rose 7/8 %, continuing its bounce off the lower boundary of its very short term
uptrend and providing encouragement that prices have seen their short term lows.
And.
And.
The dollar advanced another ½ %, remaining
technically strong, hitting another high in its uptrend since early 2018 and now
thirty cents away from a twenty year high.
The bad news is that it has two gap up opens lower down that need to be
filled. However, as I mentioned
yesterday, doing so would do little damage to its chart.
GLD
was up ¼ %. Still its chart is
broken---its 100 DMA is now resistance and gold appears headed for the lower
boundary of its short term uptrend (seven points lower).
Bottom line: the
Averages pausing after touching their all-time highs is not surprising. The question right now is how strong the resistance
at these levels proves to be. Given the
powerful momentum of the past four months, there is strong reason, at present,
to assume that they will eventually successfully challenge them.
However, conditions are there that would
precipitate near term consolidation: (1) the VIX is reflecting a very high
level of investor complacency, historically a sign of lower stock prices, (2)
the April 1st gap up open still needs to be closed and (3) the 26656/1942
[all-time highs] levels should pose some, if not a lot of, resistance.
I
remain a bit confused by the price action of the other indicators that I
follow. And I am not the only one. The
Market narrative yesterday was heavily focused on the pin action in the dollar
and the long bond, attempting to reconcile a very strong dollar with a long
bond that is not breaking down---all of this covered in the links above. The only explanation that I have is that the
rest of the world wants to own US assets (it buys dollars in order to buy
stocks and bonds)---implying that the US is being viewed as a safe haven from
economic/political problems across the rest of the globe.
Wednesday
in the charts.
Fundamental
Headlines
Only
one US datapoint yesterday---weekly mortgage and purchase applications
declined.
Overseas, the stats
continued their negative trend: the February Japanese all industry index and
leading economic indicators as well as April German business and consumer
confidence were all lousy.
Bottom line: as
I noted above, the Markets continued to dominate yesterday’s headlines with
investor attention shifting from the stock market (despite some positive
earnings reports from Market darlings) on Tuesday to the dollar and bond
markets.
I can speculate
on the reasons for this pin action; and I have.
But I also know that it could be nothing but noise. What I don’t have to speculate about is
current equity valuations which are at current historically high levels. Even assuming a complete capitulation by the
Chinese (which is not going to happen), a smart move up in US economic activity
(which isn’t happening) and a sharp pick up in corporate profits (which can’t
happen in the absence of the prior two), stock valuations are over
extended. They will likely stay that way
as long as Markets tolerate irresponsible the central bank monetary
policy.
My only answer
to that situation is sit back and enjoy it but to continue to take money off
the table when one of our stocks enters its Sell Half Range.
The
disconnect between oil prices and energy stocks.
News on Stocks in Our Portfolios
Revenue of $1.3B (-2.3% Y/Y) beats by $10M.
Revenue of $13.5B (+4.7% Y/Y) beats by $140M.
Revenue of $9.26B (+22.8% Y/Y) beats by $360M.
Revenue of $22.9B (-2.1% Y/Y) misses by $140M.
Revenue of $44.83B (+17.8% Y/Y) misses by $270M.
Revenue of $30.6B (+14.1% Y/Y) beats by $740M.
W.W. Grainger (NYSE:GWW)
declares $1.44/share quarterly dividend, 5.9% increase from prior
dividend of $1.36.
Exxon Mobil (NYSE:XOM)
declares $0.87/share quarterly dividend, 6.1% increase from prior dividend of
$0.82.
Economics
This Week’s Data
US
March
durable goods orders rose 2.7% versus expectations of +0.8%; ex transportation,
they were up 0.4% versus +0.2%.
Weekly
jobless claims rose 37,000 versus estimates of down 7,000.
International
The
Bank of Japan met and maintained its dovish posture.
Other
Government
spending still out of whack (must read):
Away
from the headlines, what actions is the Fed taking?
China
fact of the day.
Tariffs
raise the price of domestic goods too.
What
I am reading today
California now teaching pedophilia
as ‘sexual orientation’.
Visit Investing
for Survival’s website (http://investingforsurvival.com/home)
to learn more about our Investment Strategy, Prices Disciplines and Subscriber
Service.
No comments:
Post a Comment