The Morning Call
5/14/19
The
Market
Technical
The Averages (25324,
2841) got pummeled yesterday. They opened
down big and, unlike last week’s late day recoveries, stayed down. Both bounced
hard off their Friday’s close right on the upper boundaries of their very short
term downtrends---not good; and blew through the support offered by filling the
April 1st gap up opens---not good; and the Dow ended below its 100
DMA (if it remains there through the close on Wednesday, it will revert to
resistance) and 200 DMA (if it remains there through the close on Thursday, it
will revert to resistance)---not good.
The VIX exploded
up 28%, putting it back above both its
100 DMA (which reverted to support on Thursday; then fell back below it on
Friday at which time I voided the break.
Just to continue the confusion, I am voiding the void but giving the 100
DMA an ‘uncertain’ status.) and its 200 DMA (if it remains there through the
close on Thursday, it will revert to support). It is still in a solid very short term uptrend.
The long bond was
up ¾ %, finishing above both MA’s, in a very short term uptrend and has made a
higher high bouncing off the lower boundary of that uptrend.
The dollar was unchanged, continuing its
almost stationary price action. Its
chart remains quite positive; though there is still a gap up open below that
needs to be filled.
GLD
was up 1% on big volume, pushing above the upper boundary of its very short
term downtrend (if it remains there their the close today, it will be negated)
and its 100 DMA (if it remains there through the close on Wednesday, it will
revert to support). If it holds these
levels, then the chart would flip from broken to positive. Unfortunately, GLD had a gap up open which
needs to be filled. If that occurs anytime
soon, then yesterday’s upbeat pin action will be for naught.
More
on bitcoin.
And.
Bottom line: the
indices positive price performance last Thursday and Friday (closing the April
1st gap up opens, then bouncing hard) proved ephemeral. Now my attention turns to key support levels which
are the 100 and 200 DMA’s. The Dow is
already challenging both its MA’s while the S&P is 40-60 points away
(another day like yesterday).
The pin action
in the dollar continues to point at a stronger economy/higher rates; but yesterday
the long bond and gold again said otherwise.
However, all would qualify as safety trades---which would not be surprising
in the current environment.
Monday
in the charts.
Deal
or no deal.
Fundamental
Headlines
No US economic
data yesterday. There were a couple of
international stats: March Japanese leading economic indicators and April
Chinese vehicle sales were below estimates.
But the main headline
was the Market apparently coming to grips with the fact that there might not be
a trade deal anytime soon and what that would mean for global economic growth
(slower), US corporate profits (lower) and the appropriate valuation thereon
(not up). Of course, if history is any
guide, we are sure to get multiple positive tweets from the Donald. Indeed, we did (Trump said that he hadn’t
decided on whether to not to implement the additional tariff of $300 billion in
Chinese imports); and this is the big problem---Markets didn’t seem to care.
That
could be a new variable in the economic/trade narrative. If Trump can’t talk the Market up on bad news,
then bad news will remain bad news and that’s bad news for the Market. All that said, this is one day of pin action;
so, we need more evidence that Trump has lost his credibility on the trade
narrative before assuming that it is so.
***overnight, Trump tries
again.
However, the US
has started the process for imposing the tariffs---which would take roughly
until the end of June. So, there is
wiggle room for getting a deal before the next round of tariffs go into effect.
China
not budging.
China
fake goods.
The
case for free trade. Everything this analyst
says about the detrimental effects of tariffs is correct. The problem is that he offers no solution for
correcting the unfair Chinese industrial and IP theft policies.
Much
has been made of the potential threat of China selling its large holding of US
Treasuries and its effect: higher interest rates, Jeffrey Snider puts that notion to rest.
Bottom
line: I have to wonder (1) what Trump is
going to do if the power of the tweet is gone---if yesterday is an indication
that it has and (2) how far down Trump will let the Market fall before he
caves? (3) how far down the Fed will let
the Market fall before it lowers rates?
Whatever occurs,
my bottom line hasn’t changed: (1) we
can’t believe a thing that gets said by either party for public consumption,
(2) no deal is better for long term US secular economic growth than a crumby
deal, but (3) short term, a crumby deal will
be better for the economy than no deal, (4) in any case, now that
tariffs are going up, economic and corporate profit expectations will likely
start to be reduced with the concomitant impact on equity valuations and (5)
hoping for a deal, won’t make so.
The
value of cash.
Iran
taunts the US.
News on Stocks in Our Portfolios
Economics
This Week’s Data
US
Month
to date retail chain store sales were flat with the prior week.
The
April small business optimism index came
in at 103.5 versus estimates of 102.3.
April
import prices rose 0.2% versus expectations of +0.7%; export prices were up 0.2
versus +0.5%.
International
March
EU industrial production declined 0.3% in line with forecasts.
Other
The
slow return of eurosclerosis.
LA
port traffic down year over year.
What
I am reading today
Apollo rocks show how moon was
made.
Money
can buy happiness.
Our
first instinct is too often wrong.
Financial
superpowers.
Three mistakes that you may
make with your money.
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for Survival’s website (http://investingforsurvival.com/home)
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