The Morning Call
4/5/19
The
Market
Technical
The Averages
(DJIA 26384, S&P 2879) continued their advance yesterday. There is no resistance between current prices
and their all-time highs (26951/2942).
So, my assumption is that the indices will challenge those highs; but
there are still negatives that may inhibit momentum---the pin action in the
dollar and bonds as well as Monday’s gap up open (that will likely be closed).
Volume declined. Breadth improved.
The VIX fell 1
1/8 %, ending above its double bottom and continuing to develop an inverse head
and shoulders (a negative).
The long bond rallied
¼%, its chart remaining strong---in a very short term uptrend and above
MA’s. However, it has yet to close that
gap open of two Friday’s ago. More downside would not be surprising.
The dollar was up
three cents. 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; but it still hasn’t happened), 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 rose ¼ %. It is still in a solid uptrend. The other good news is that it touched and
then bounced off the 100 DMA and the double bottom; and last Thursday’s gap
down open needs to be closed. The bad
news is that it continues to develop a head and shoulders pattern.
Bottom line: while
the Averages are moving into overbought territory, it is not extreme. I think that they are headed for 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.
Thursday in the
charts.
Fundamental
Headlines
After
a busy first half of the week for economic dataflow, yesterday ground to a
virtual halt. In the US, weekly jobless
claims fell (good news); but February German factory orders were abysmal.
Other
headlines:
The
narrative on the US/China trade talks continues to bounce around like a cue
ball on a Minnesota Fats quadruple bank shot.
Late in the day, the New York Times reported a rumor that Trump was about
to announce a meeting with Xi. Later in
a news conference, Trump said a meeting could be a couple of months off while
Lighthizer tried to play down even this schedule
***overnight, Xi
says great progress is being made.
Trump
gave Mexico a year (seems to be a new trend in ‘the art of the deal’) to stop
the flow of drugs and illegal immigrants across the border before he takes any
action.
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
March
nonfarm payrolls rose 196,000 versus forecasts of 170,000
International
February Japanese
household spending declined 2.0% versus estimates of -0.5%, cash earnings
dropped 0.8% versus +0.8%, leading economic indicators came in at 97.4 versus
97.3.
February
German industrial production rose 0.7% versus expectations of +0.5%.
Other
What
will the next recession look like?
Oil
and gasoline prices continue to rise.
Saudi’s threatened to
ditch the petrodollar.
May requests
another Brexit extension.
Hotel occupancy
rates rose year over year.
What
I am reading today
Can
meditation slow aging? (this is long article but very interesting):
Buying
the good stocks can be bad.
Another success in Afghanistan.
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for Survival’s website (http://investingforsurvival.com/home)
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