The Morning Call
2/14/20
The
Market
Technical
The Averages (29423,
3373) sold off yesterday. Nonetheless, the
Dow ended above its former all-time high (29373) for a second day, re-establishing
a very short term uptrend and putting it back in sync with the S&P. This eliminates any near in resistance and
marks the likely next challenge at 32301/3583.
Retail traders go
manic.
This rally is a
Fed induced perversion.
However, VIX rallied
enough to finish back above its 100 DMA (voiding Wednesday’s challenge) but not
enough to regain its 200 DMA (if it remains there through the close next
Monday, it will revert to resistance).
GLD, TLT and UUP resumed their strong move as
safety trades. GLD was up, establishing
both a new higher low and a new higher high.
TLT set a new higher low. And UUP
ended above the upper boundary of its short term downtrend; if it remains there
through the close on Monday, the short term trend will be reset to a trading
range. Their pin action continues to say ‘safety
trade’ to me.
Real yields on
TIPS go negative.
Thursday in the
charts.
Fundamental
Headlines
Yesterday’s data
was mixed. Weekly jobless claims were up less than expected while the January budget
deficit was much more. And January core
CPI was in line.
Overseas,
January Japanese PPI rose more than anticipated while January German CPI
declined but was in line.
The
biggest headline was the early morning report out of China that dramatically revised
up the coronavirus infection and fatality rates.
Ed Yardini on the potential
impact of the coronavirus.
The latest anecdotal
evidence of economic activity in China.
***overnight, the
latest coronavirus ‘stats’ out of China.
Other headlines on
relevant issues:
Something positive
about the new Trump budget.
The latest Fed
operations.
https://www.zerohedge.com/markets/liquidity-warning-fed-shrinks-overnight-repos-20bn-term-repos-10bn
Bottom line: I
wouldn’t characterize the news flow as upbeat: (1) the coronavirus is taking a
heavier toll on the Chinese economy that was generally accepted 24 hours
before, (2) fiscal policy will apparently continue to load more growth stifling
debt on the US economy and (3) the Fed seems to be growing increasingly oblivious
to the impact that QEInfinity is having on the mispricing and misallocation of
assets.
Equity investors
continue to ignore the above. However,
investors in bonds, gold and the dollar aren’t.
Somebody is going to be wrong.
Maybe not today, next week or next month. But, at some point, it will almost surely
occur. Until I know who has it right, cash
reserves seem like a good idea.
News on Stocks in Our Portfolios
United Parcel Service (NYSE:UPS) declares $1.01/shar quarterly dividend, 5.2% increase from
prior dividend of $0.96.
Economics
This Week’s Data
US
January
retail sales rose 0.3%, in line; ex autos, they were up 0.3%, also in line.
International
Q4
German flash GDP growth was 0.0% versus
estimates of +0.2%; January wholesale prices rose 0.1% versus +0.2%.
Q4
EU GDP growth was +0.1%, in line; employment was up 0.3% versus +0.1%; its
December trade surplus was E23.1 billion versus E21.4 billion.
Other
China
auto sales plunge in January.
Global
oil demand set for first quarterly contraction in ten years.
Declining
oil prices are not good for the economy.
The
impact of extreme optimism in construction.
Pro
Judy Shelton appointment to the Fed.
Con
Judy Shelton appointment to the Fed.
What
I am reading today
Mechanic trees to remove
CO2.
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