The Morning Call
2/12/20
The
Market
Technical
The Averages
(29276, 3357) marched in place yesterday (Dow unchanged, S&P up 5 points). The S&P remained above its all-time high for
a second day, re-establishing a very short term uptrend; however, the Dow again (29373) fell
short. That leaves the indices out of
sync---not that unusual when they are in trading ranges. However, further mudding the water, the VIX
continues to trade like investors are more risk averse than suggested by the
indices’ price action.
At the moment, my
assumption is that the indices are in a very short term trading range defined
by their all-time highs on the upside (29373, 3337) and the mid-December gap up
opens (28394/3215) on the downside.
What money flows
say about the stock market.
Buybacks are
running 27% ahead of the same period last year.
A study of past
epidemics and their impact on the Market.
Is there a link between
Market crashes and the GOP?
GLD, TLT and UUP all
drifted lower. Not that big a deal on ho
hum Market day. Follow through is what
is important. Their pin action continues
to say ‘safety trade’ to me.
The dollar surge
poses risk to the economy.
Tuesday in the
charts.
Fundamental
Headlines
Yesterday’s reported
stats were negative though they were tertiary indicators. Month to date
retail chain store sales and the December Jobs Openings (JOLTS) report were
disappointing.
Overseas, the
preliminary Q4 UK trade balance and December GDP growth were better than anticipated;
Q4 business investment plus December industrial production and manufacturing production
were below estimates.
***overnight,
OPEC slashes oil demand forecast.
Other issues
with potential impact on stock prices:
(1)
Trump’s budget maybe DOA but that doesn’t mean that
the historic pattern of profligate spending will change.
The national debt is an intergenerational
injustice.
(2)
Powell gave his first day of Humphrey Hawkins
testimony before the house yesterday.
There was little new in either his prepared comments or during the
Q&A. The bottom line being to expect
further rate cuts this year.
On Judy Shelton’s (Fed candidate) policy
leanings.
Is a fix in the
works for the repo market liquidity problem?
And
will it provide the Fed with plausible deniability that NotQE exists?
Bottom line: valuations on many stocks are
getting richer everyday even though investors know that earnings estimates are going
to come down, at the very least temporarily.
Longer term, there is cause for debate: (1) the length and magnitude of
the coronavirus hit is simply not knowable at this time [though, as you know, I
don’t believe the effect will be a major negative] and (2) longer term, I think
that the adverse impact of irresponsible fiscal and monetary policies on
economic growth will disappoint investor corporate profit expectations.
None of that matters as long as the
central banks QE provide cheap money to speculators.
Why we should worry about stagflation
(must read):
UBS flagship real estate fund hit with
redemptions.
News on Stocks in Our Portfolios
Economics
This Week’s Data
US
Month
to date retail chain store sales grew slower than in the prior week.
The
December Jobs Openings (JOLTS) report showed 6.423 million openings versus
consensus of 7 million.
Weekly
mortgage applications rose 1.1% but purchase applications fell 5.8%.
International
December EU
industrial production declined 2.1% versus estimates of -1.6%.
January Japanese
machine tool orders YoY dropped 35.6% versus forecasts of -28.0%.
Other
Mortgage
delinquencies fell in Q4 2019.
Household debt tops $14
trillion in Q4 2019.
What
I am reading today
How to choose an airplane
seat.
What causes auto deaths.
This is what winners do.
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