The Morning Call
1/28/20
The
Market
Technical
The Averages
(28535, 3243) took it in the snoot yesterday, apparently on rising concerns
over spread of the coronavirus. While they still ended above both MA’s and in short,
intermediate and long term uptrends, they broke their very short term uptrends
(if they remain there through the close today, those trends will be
voided).
But that hardly
points to a loss in long term momentum.
Indeed, (1) the indices experienced major gap down opens which will exert
upward pressure on prices and (2) really significant support doesn’t exist
until they reach their 100 DMA [27661/3098] and the lower boundaries of their
short term uptrends [24696/3058]. Volume
was down, breadth weak, moving out of overbought territory.
All that said,
GLD, TLT and UUP were telling us that stocks were out of touch with the rest of
the Markets, witness their reaching very overbought territory. It only took a trigger to take the technical
excess out of stock prices.
A more technical
appraisal.
The VIX soared 25%,
ending for a second above both its 100 DMA (now resistance; if it remains there
through the close today, it will revert to support) and its 200 DMA (now
support; if it remains there through the close Wednesday, it will revert to
support). At the moment, it appears that
it is just following equity prices.
The long bond had
another good day (up 1 ½ %), finishing above its 100 DMA (now support). It continues a directional change to the
upside; though there is now two gap up
opens below that needs to be filled.
The dollar was up 1/8%,
but remains below both MA’s, in a short term downtrend and is still the ugliest
chart on the block. While it is attempting
to close that big gap down open from 12/23, my assumption remains that the
dollar will continue to weaken.
Gold was up
another 5/8%, closing within very short term and short term uptrends and above
both MA’s.
Monday in the
charts.
Fundamental
Headlines
Yesterday’s data
was mixed. December new home sales were
disappointing; and the January Dallas Fed manufacturing index, while negative,
was still better than expected.
Bottom line. the major headline was the spread of the
coronavirus and the fear of its potential impact on the global economy. Of course, there is no way to determine the
latter today. We do know from past
experience that the odds of the development/discovery of a vaccine/cure for the
virus are reasonably high within a short enough period of time---which would
avoid any kind of catastrophic effect on the global economy.
***overnight
update.
The
real issue is the impact on equity prices.
As you know, I believe them to be dramatically overvalued; but expect
them to remain so as long as the Fed and its fellow central banks continue to
pump money into the financial system. For
the moment, I see no reason that the fallout from the coronavirus would alter
that assumption. So, barring some other
Market altering development, it is likely that any decline in stock prices
stemming from the coronavirus worries will be contained.
News on Stocks in Our Portfolios
Economics
This Week’s Data
US
December
new home sales fell 0.4% versus expectations of a 1.5% increase.
The January Dallas Fed
manufacturing index came in at -0.2 versus estimates of -3.1
Month to date
retail chain store sales grew faster than in the prior week.
The November Case
Shiller home price index was up 0.1% versus forecasts of +0.2%.
December durable
goods orders rose 2.4% versus consensus of +0.4%; however, ex transportation,
they fell 0.1% versus +0.2%.
International
Other
Why
the new Silk Road is a threat to the US bloc.
What
I am reading today
The
man who tried to sell the Eiffel Tower (twice).
If no one has to work, no
one will.
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for Survival’s website (http://investingforsurvival.com/home)
to learn more about our Investment Strategy, Prices Disciplines and Subscriber
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