The Morning Call
4/9/19
The
Market
Technical
The Averages
(DJIA 26341, S&P 2895) were mixed yesterday (Dow down, S&P up) largely
due to the disproportionate impact of Boeing’s stock price (which was down big)
on the DJIA. Nothing here is suggest that
the indices won’t continue their advance toward their all- time highs
(26951/2942). There are still negatives
that may inhibit momentum---the pin action in the dollar and bonds as well as last
Monday’s gap up open (that will likely be closed).
Volume was
flat. Breadth was negative.
The VIX rose 2 7/8
%. However, it remained below its double
bottom and in a new very short term downtrend (a plus for stock prices).
The long bond fell
3/8%, but still has a strong chart---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.
Bond
trading exodus.
The dollar was also
down 3/8%. While it failed to close
above its prior high, the chart remains quite positive (above both MA’s and in
a short term uptrend). The bad news is
that it gapped up on last Wednesday’s open and that needs closing.
GLD was up ½ %. It is in an uptrend and needs to close last
Thursday gap down open, though it continues to develop a head and shoulders pattern.
Bottom line: aside
from being somewhat overbought, there is nothing standing between the Averages
at current prices and their all-time highs.
However, there is enough negatives coming from other indicators (mixed
signals from the dollar, the long bond and gold plus Monday’s gap up open) to
create some doubt about the strength of any upward momentum.
Monday
in the charts.
Fundamental
Headlines
One
datapoint released yesterday: February factory orders fell 0.5%, but were in
line with the revised January reading.
Overseas,
March Japanese consumer confidence and February German exports/imports were
below consensus.
Yesterday
was a snoozer aside from the above economic reports---which were in line with
current slower growth trends. Things
will pick up tomorrow when the EU holds its emergency Brexit summit, the ECB
meets and the Fed releases the latest FOMC minutes.
***overnight,
the World Trade Organization ruled that the EU gave unfair subsidies to Airbus
and Trump ramped up the trade threats to the EU.
Bottom line: I think that the risk/reward is poor if you
are buying stocks on a US/China trade deal that will adequately address Chinese
industrial policy and IP theft. I think
that the risk/reward is poor at current valuation levels if you are buying
stocks on an improving global economy/but easy Fed.
I think that the risk/reward is questionable
if you are buying stocks on the continuing massive liquidity infusion by the
central banks. But that trade is probably
going to continue to work---until it doesn’t.
Recognize that this is a short term bet with a hair trigger.
News on Stocks in Our Portfolios
Economics
This Week’s Data
US
February
factory orders fell 0.5% versus expectations of -0.6% (though the January number
was revised down, making this stat in line); ex transportation, they were up
0.3% versus estimates of up 0.1%.
International
The
March small business optimism index came in at 101.8 versus estimates of 101.3.
Other
A
deep dive into the jobs number.
The
latest on Brexit.
What
I am reading today
Four lessons from Seth
Klarman.
Visit Investing
for Survival’s website (http://investingforsurvival.com/home)
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