Friday, February 14, 2020

The Morning Call--The Averages are back in sync and headed higher

The Morning Call


The Market

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.



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.

            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.

Nike (NYSE:NKE) declares $0.245/share quarterly dividend, in line with previous.          


   This Week’s Data


            January retail sales rose 0.3%, in line; ex autos, they were up 0.3%, also in line.


            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.


            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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