Wednesday, January 22, 2020

The Morning Call---Valuation, valuation, valuation

The Morning Call


The Market

While the Averages (29196, 3320) took a breather yesterday, they still closed above both MA’s and in uptrends across all timeframes.  Volume rose; breadth remained strong though it is in overbought territory.  Remember that there are still multiple gap up opens down below that ultimately need to be filled.


The VIX was up 6 ¼%, but that did little to improve the chart/suggest that investor sentiment could be changing to the negative.

The long bond rose 1%, but momentum remains to the downside.  That is not surprising given the current positive investor sentiment regarding an improving economy.  The only potential technical challenge is that TLT is nearing its 100 DMA (now resistance).  A move above that MA could call into question the current upbeat economic scenario.

The dollar continued to decline (down two cents).  Of the group of indices that I follow, it has by far the ugliest chart.  So, it appears that there is more downside.  That said, there is a huge gap down open dating back to 12/23 that will at some point begin to exert a powerful magnetic pull to the upside on UUP. 

Gold was up 1/8%, closing within very short term and short term uptrends and above both MA’s.

The charts of TLT and the S&P are clearly pointing at a stronger economy.  Those of GLD and UUP not so much.

            Tuesday in the charts.



            No US stats reported yesterday.  Overseas, the numbers continued their positive trend. October UK payrolls, November German PPI and January EU and German economic sentiment were better than anticipated.  However, November Japanese industrial production was below estimates.

            Bottom line: impeachment sucked a lot of air out of the Market yesterday; though Boeing’s latest announcement on the delay of the recertification of the 737 Max had an impact.

            Lurking in the background is the potential negative developments if the SARS like virus in China were to begin spreading.  Too soon to know if this will become a problem.

            More discussion on valuations:

            The latest from David Rosenberg (must read).

            Counterpoint from Ed Yardini.

            The latest from Paul Tudor Jones.

            Cash on the sidelines.

    News on Stocks in Our Portfolios
Johnson & Johnson (NYSE:JNJ): Q4 Non-GAAP EPS of $1.88 beats by $0.01; GAAP EPS of $1.50 beats by $0.03.
Revenue of $20.75B (+1.8% Y/Y) misses by $80M.



   This Week’s Data


            Weekly mortgage applications fell 1.2% while purchase applications were down 2.0%.

            Month to date retail chain store sales growth was flat with the prior week but an improvement from the negative growth of the week before.

            The November housing index came in at 0.2, in line.

            The December Chicago Fed national activity index was reported at -0.35 versus consensus of -0.3.


            January German economic sentiment was reported at 26.7 versus forecasts of 15.0.

            Q1 UK business optimism came in at 23 versus expectations of -28.


            Price Waterhouse global survey shows CEO’s negative on economic growth in 2020.       

            A history of interest rates since 1311.

A mildly positive take on the US/China trade deal (surprisingly) from the NY Times.

Truck tonnage update.

What I am reading today

            Stop getting conned out of your money.
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