The Morning Call
2/3/20
The
Market
Technical
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).
Fundamental
Headlines
***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.
Economics
This Week’s Data
US
International
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.
Other
What
else I am reading today
Quote of the day.
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