Tuesday, April 9, 2019

The Morning Call--A quiet day

The Morning Call


The Market

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.



            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


   This Week’s Data


            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%. 


            The March small business optimism index came in at 101.8 versus estimates of 101.3.


            A deep dive into the jobs number.

            The latest on Brexit.

What I am reading today

            Four lessons from Seth Klarman.

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