The Morning Call
1/30/20
The
Market
Technical
The Averages (28734,
3273) after a strong start, ended the day mixed (Dow up, S&P down). Intraday, the Dow closed last Monday’s gap
down open, joining the S&P---meaning its magnetic pull to the upside is
gone.
In addition, the
S&P again ended below the lower boundary of its very short term uptrend,
restarting the clock on Monday’s break.
If it remains there through the close today, the trend will be voided---the
Dow having already done so on Tuesday.
This would resync the indices and suggest more downside. However, they still ended above both MA’s and
in short, intermediate and long term uptrends. So, there has hardly been a loss in long term
momentum.
On the other hand,
really significant support doesn’t exist until the Averages reach their 100 DMA
[27661/3098] and the lower boundaries of their short term uptrends
[24696/3058].
Volume was down,
breadth mixed. The VIX up fractionally, but
still finished for a fourth day above its 200 DMA (reverting to support),
following a similar move in the 100 DMA Tuesday. These
reversions are reinforcing the loss of short term upside momentum reflected in indices
pin action.
The long bond bounced
1%, resuming its ongoing directional momentum change to the upside. Although there are two gap up opens below
that need to be filled.
The dollar edged
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 ½ %,
closing within very short term and short term uptrends and above both MA’s.
TLT, GLD and UUP continue
to trade like the economy is not near any kind of ‘lift off’. The Averages are leaning in that direction
but are not quite there yet.
Wednesday in the
charts.
Fundamental
Headlines
Yesterday’s
numbers were slightly upbeat. Weekly
mortgage and purchase applications along with the December trade deficit were
positive while December wholesale inventories were neutral and December pending
home sales negative.
Overseas, January
Japanese consumer confidence was below expectations while the February German consumer
confidence was above.
The FOMC wrapped
up its January meeting yesterday. Its official
statement for the soiree read pretty much as expected---rates unchanged, NotQE
to continue through April, the Fed’s economic assessment was ever so slightly
less positive. Here is the text and a
more detailed initial analysis.
***overnight,
the Bank of England met. While it left
rates unchanged, it dropped any reference to future tightening.
Following
Tuesday’s CBO forecast of an ever rising federal deficit and national debt, I thought
these articles relevant:
Government debt is
not a free lunch.
Fool’s yield of private credit.
Bottom line: neither
the FOMC nor the BOE economic outlooks were particularly upbeat. Add in the impact of the growing coronavirus
epidemic and one would expect Street 2020 economic growth forecasts to start to
falter. Of course, the coronavirus affects
are still likely to be temporary; that is, it likely won’t influence long term
secular growth trends.
However, the
continuing failure of excessive global monetary growth to goose economic growth
is another matter. I have long maintained
that that QE policy had a negative influence on economic (through the mispricing
and misallocation of assets). And when
coupled with an equally irresponsible fiscal policy (massive deficits/debts
usurping growth capital), the US and, indeed, the global economy was stuck with
below average secular growth. That has
been and remains my forecast. Perhaps
the latest comments from the central bankers are starting to drive that point
home to investors. Or perhaps, another
dose of Not QE is on the way and keeps the party going.
News on Stocks in Our Portfolios
Revenue of $36.9B (+13.6% Y/Y) beats by $1.22B.
Sherwin Williams (NYSE:SHW): Q4 Non-GAAP EPS of
$4.27 misses by $0.11; GAAP EPS of $2.66 misses
by $1.57.
Revenue of $4.11B (+1.2% Y/Y) misses by $80M.
United Parcel Service (NYSE:UPS): Q4 Non-GAAP EPS of
$2.11 in-line; GAAP EPS of -$0.12.
Revenue of $20.57B (+3.6% Y/Y) misses by $90M.
Revenue of $9.1B (+16.0% Y/Y) beats by $220M.
Altria (NYSE:MO): Q4 Non-GAAP EPS of $1.02 in-line; GAAP EPS of -$1.00.
Revenue of $4.8B (+0.3% Y/Y) misses by $90M.
Revenue of $2.85B (+3.3% Y/Y) in-line.
BlackRock (NYSE:BLK) declares $3.63/share quarterly dividend, 10% increase from
prior dividend of $3.30.
Economics
This Week’s Data
US
December
pending home sales fell 4.9% versus estimates of +0.5%.
The initial Q4 GDP growth
estimate came in at 2.1%, in line; the price indicator was +1.5% versus expectations
of +1.8%; PCE was 1.6% versus 1.7%, core PCE was 1.3% versus 1.7%.
Weekly
jobless claims fell 7,000 versus forecasts of down 8,000.
International
December
EU unemployment was 7.4% versus consensus of 7.5%.
January
EU business confidence was -.23 versus projections of -.19; consumer confidence
was -8.1, in line; economic sentiment was 102.8 versus 101.8; industrial sentiment
was -7.3 versus -8.7 and services sentiment was 11.0 versus 11.2.
January
German CPI was -.6%, in line.
Other
What
I am reading today
The
price history of Campbell’s tomato soup.
A
conversation with Alex Trebek.
Different
kinds of easy.
The
size of Russian forces in Ukraine.
Three retirement account
blunders.
Quote
of the day.
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