The Morning Call
4/16/19
The
Market
Technical
The Averages
(DJIA 26384, S&P 2905) drifted modestly lower on light volume and negative
breadth. The S&P’s pin action
remains almost perfect. The Dow slightly
less so. I continue to believe that they will almost
surely hold their momentum long enough to challenge their all-time highs.
But, there are
two potential negatives that I discussed in last weekend’s Closing Bell: (1) both
indices made a second gap up open on Friday.
Meaning they now have two gap up opens exerting restrain on the upside,
(2) while the recent drawdown in the VIX would normally be a plus for stocks,
it has now reached a level that puts it near an all-time low. Historically, this has been a signal that
stock prices are getting stretched.
The long bond
was up ¼ % after closing the gap up open of four Friday’s ago and removing the
magnetic pull of that gap. Meanwhile, it
remains in a very short term uptrend and above MA’s.
The dollar
declined one cent. So, 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 off again
and is nearing its 100 DMA/triple bottom---the lower boundary of the trading
range whose the upper boundary is its very short term downtrend. A break below the 100 DMA/triple bottom (which
is also the neckline of the developing head and shoulders formation) would mark
a sharp deterioration in the GLD chart. It
suggests that investors would be betting on a stronger economy/higher rates.
Bottom line: the
upward momentum in the indices continues which I believe will take them to
their prior all-time highs. Though I am
not sure that they can mount a successful challenge until those gaps are closed
and the optimism reflected in the VIX dissipates some.
Monday
in the charts.
Fundamental
Headlines
One
datapoint yesterday: the April NY Fed manufacturing index was above
expectations. Nothing from overseas.
The
main headlines related to trade:
US
waters down China trade deal.
US/EU start their
trade negotiations.
Trump may be
undercutting his own deals.
Bottom
line: it appears that the US/China trade negotiations are close enough to
concluding that the administration can no longer blow smoke up the electorate’s
skirt about how wonderful the deal is going to be. To be sure, if the US ceded Hawaii to China,
Trump et al would find a way to make it look like the greatest thing since
sliced bread. Still, we don’t know all the details so there is no final judgment. That said, the above summary of current state
of the talks raises the question of whether much has been accomplished.
Update
on Q1 earnings season.
News on Stocks in Our Portfolios
Revenue of $20.02B (flat
Y/Y) beats by $470M.
Revenue of $3.35B (-6.4%
Y/Y) beats by $50M.
Economics
This Week’s Data
US
International
The
February UK unemployment rate was 3.9%, in line.
February
EU construction output rose 5.2% versus estimates of up 2.0%.
February
EU economic sentiment came in at 4.5 versus forecasts of 1.2.
Other
Credibility
problems inside the ECB.
Improved
outlook for global economy.
But
don’t forget about Italy.
Moore
and Cain could fix the Fed.
IMF
on the economic impact of Brexit.
Chinese interest
rates on the rise---maybe all those upbeat stats were for real.
What
I am reading today
Why
we never all be happy again.
How to avoid the estate
tax and die happily ever after.
Redemption.
Crypto currencies
bedeviled by algos.
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for Survival’s website (http://investingforsurvival.com/home)
to learn more about our Investment Strategy, Prices Disciplines and Subscriber
Service.
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