The Morning Call
2/27/20
The
Market
Technical
The Averages (26957, 3116) continued their high volume challenge of
multiple support levels yesterday. (1)
the Dow ended below both its 100 DMA for a third day, reverting to resistance and
its 200 DMA for a second day [now support; if it remains there through the close
on Friday, it will revert to resistance] and (2) the S&P finished below its
100 DMA for a second day [now support; if it remains there through the close today,
it will revert to resistance] and the lower boundary of its short term uptrend [if
it remains there through the close on Friday, it will reset to a trading range].
The above is a lot
of resistance to get through especially when the indices appear to have exhausted
themselves on the downside. That is not
to suggest that prices won’t go lower (and I think that they will) but just to
observe that the Averages are extremely oversold on a very short term
basis. So, something more than a
pathetic intraday rally seems likely somewhere in our near future.
That said, the
momentum that has taken stocks to current levels has not likely dissipated. My conviction for this assumption stems from
the pin action in the long bond, gold and the dollar which continues to point
to a weakening global economy/need for safety.
So, I think it reasonable to assume that the above support levels will
get successfully challenged.
Time to be very
careful.
Wednesday in the
charts.
Fundamental
Headlines
Yesterday
was a slow day for data. Weekly mortgage
and purchase applications were up and January new home sales were very strong.
Bottom line: both the
live and print media were dominated by coronavirus headlines yesterday. Which understandably have citizens/investors
concerned and that is not helping psychology.
***overnight
news on the coronavirus.
From the Market’s
standpoint, it hates uncertainty and we still have no idea about the timing and
extent to which the economic impact of the coronavirus will start showing up in
the numbers.
However, that is
not the only unknown. We still don’t
know what the TLT, GLD and UUP markets have been discounting (remember they
started their tear long before we ever heard of the coronavirus), whether they
are correct and how that gets reflected in equity prices.
Finally, we don’t
know what the fiscal/monetary policy reaction will be to this crisis. But we do know that easy fiscal and, especially
easy monetary policies have heretofore played an enormous role in the pricing
of risk. Does anyone doubt that Fed won’t
crank up the volume if the virus creates economic turmoil? The questions are, will it do any good and/or will the Market care?
Those unknowns will
likely continue to make the Market the main story.
What is the Fed to
do?
Because what it has
done to date has been a failure.
Helicopter money
has arrived.
News on Stocks in Our Portfolios
Economics
This Week’s Data
US
January
new home sales rose 7.9% versus estimates of up 3.5%.
The Q4 GDP growth second estimate
was +2.1%, in line; the PCE price deflator was +1.3% versus forecasts of +1.6%.
January
durable goods orders fell 0.2% versus expectations of -1.5%; ex transportation,
they were up 0.9% versus +0.2%.
Weekly
jobless claims increased 8,000 versus consensus of +1,000.
International
February
EU business confidence came in at -0.04 versus forecasts of -.28; consumer
confidence was -6.6, in line; economic sentiment was 103.5 versus 102.8;
industrial sentiment was -6.1 versus -7.3; services sentiment was 11.2, in
line.
Other
What
I am reading today
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