Monday, February 3, 2020

Monday Morning Chartology

The Morning Call


The Market

            The S&P had a busy week.  It (1) created a major gap down open on Monday, then managed to close it, (2) voided a very short term uptrend and (3) is near closing one of several small gap up opens.  My assumption is that barring sudden massive infusion of Fed liquidity, the S&P will, at least, test its 100 DMA (3110) and/or the lower boundary of its short term uptrend (3076).

            The long bond started to signal a retreat in investor economic growth expectations before the coronavirus raised its ugly head.  As you know, I was suspect of recent Market jigginess over some kind of ‘lift off’ and remain so.  Hence, I think the trend to lower yields will continue.  That said, the coronavirus may act as an accelerant in the short term.

            Substitute ‘GLD’ for ‘the long bond’ and the paragraph reads the same.

            Likewise, the dollar also is pointing to economic weakness.  It has been in decline since late last year and made a failed attempt to challenge its 200 DMA on Wednesday.  So, the TLT, GLD, UUP trifecta are all suggesting economic ‘lift off’ is a wet dream.  Stocks may be confirming but that could turn on a dime if the Fed decides to switch on the NotQE afterburners.

            The VIX is performing as you might expect during this Market selloff.  It is getting near a nine month high which suggests that equity prices may be getting overextended to the downside on a short term basis.  This notion is supported by several of the Market breadth indicators (oversold).



            ***overnight update on the coronavirus.

            The rotation to value. (must read).

    News on Stocks in Our Portfolios
Illinois Tool Works (NYSE:ITW): Q4 Non-GAAP EPS of $1.88 beats by $0.02; GAAP EPS of $1.99 beats by $0.13.
Revenue of $3.47B (-3.1% Y/Y) in-line.


   This Week’s Data



            The January Japanese manufacturing PMI was 48.4 versus estimates of 49.3.

            The January Chinese Caixin manufacturing PMI came in ta 51.5 versus consensus of 50.5.          

            The January EU manufacturing PMI was reported at 47.9 versus forecasts of 47.8.

            The January UK manufacturing PMI was 50.0 versus expectations of 49.8.


What else I am reading today

            Quote of the day.

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