The Morning Call
2/6/20
The
Market
Technical
The Averages (29290,
3334) continued their powerful rally, nearing the upper boundaries (their all-time
highs) of my watch range (29373/3337). A
close above that level for two consecutive days will reset very short term uptrends. Strong money flows suggest that a reset is a
good probability. And, of course, there
is the indices’ underlying long term technical strength. The only bothersome thing is that the VIX remains
at a much higher level than seems normal in such an explosive Market (suggesting
that investors are more risk averse than is obvious in stock prices).
Stocks
A new catalyst emerges
to push stocks higher.
Nonetheless, the ‘improving
economic growth rate’ scenario appears squarely back on the table and is being
supported by declining bond prices and a stronger dollar---yesterday, the latter
broke above its 200 DMA (now resistance; if it remains there through the close
on Monday, it will revert to support).
If this challenge is successful, then the technical position of UUP will
improve.
GLD’s pin action
belied the aforementioned scenario; but it could be that increasing inflation
expectations are becoming a part of the outlook.
Wednesday in the
charts.
Fundamental
Headlines
This week’s
dataflow continues upbeat. The January
services and composite PMI’s, the January ISM nonmanufacturing index and the
January ADP private payrolls reports were favorable as were mortgage
applications; however, purchase applications and the December trade deficit
were disappointing.
Overseas,
January German, EU and UK services and composite PMI’s all beat estimates while
the Japanese PMI’s were below expectations and the Chinese Caixin PMI’s were
mixed.
***overnight,
OPEC fails to agree on oil production cuts.
Bottom
line. all in all, a solid day for the
global economy. However, I remind you
that the impact of the coronavirus has yet to show up in the numbers. Not that the economic outlook will change
when it does. But the point is that we
don’t know yet. So perhaps some circumspection
might be in order.
More
important, it is not clear from the recent trend in stats that a pickup in
global growth was occurring anyway.
Certainly, I opined that the completion of the two trade deals
would almost surely add to global growth
prospects. But I also think that the growing
massive government deficit/debt and an irresponsible monetary policy act as
drags on growth. My conclusion being
that improved trade would contribute to growth potential but perhaps only
enough to offset the damage being done by fiscal/monetary policies.
For
the moment, I am sticking with that outlook and am not considering altering my
forecast if and until there is a bit more clarity.
Goldman cuts global
GDP growth prospects.
***overnight,
China cuts tariffs on some US goods.
What we can learn
from the 1980 Japanese stock market bubble.
News on Stocks in Our Portfolios
Becton, Dickinson (NYSE:BDX): Q1 Non-GAAP EPS of
$2.65 beats by $0.01; GAAP EPS of $0.87 misses
by $1.67.
Revenue of $4.23B (+1.7% Y/Y) beats by $40M.
Economics
This Week’s Data
US
The
January services PMI was 53.4 versus projections of 53.2; the composite PMI was
53.3 versus 53.1.
The
January ISM nonmanufacturing index was 55.5 versus estimates of 55.0
International
December
German factory orders fell 2.1% versus expectations of +0.6%; the January construction PMI was 54.9
versus 52.9.
Other
An
alternative view of the Trump economy.
Choosing
between wages and benefits (must read).
What
I am reading today
War
for fun and profit (today’s must read):
The
Pentagon’s $35 trillion black hole.
Three outdated retirement
rules that you should ignore.
This
is how precedents work, unfortunately.
The
biggest lie in personal finance.
NASA’s
Spitzer telescope ends 16 year mission of discovery.
Update
on bitcoin.
Quote
of the day.
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