Tuesday, February 25, 2020

The Morning Call---The Market is the story

The Morning Call


The Market

The Averages (27960, 3225) got carpet bombed on heavy volume yesterday.  Both ended below the lower boundaries of their very short term uptrends; if they remain there through the close   today, those trends will be negated.  The Dow also finished below its prior low and its 100 DMA (now support; if it remains there through the close on Wednesday, it will revert to resistance). 

Clearly, upside momentum has been lost.  But keep in mind that the broken uptrends were very short term, hardly a reason to get major league beared up.  In addition, they both experienced huge gap down opens which, as you know, I believe have to be filled.  So, to date, nothing really bad has occurred.  Supporting my initial technical assumption following a breakdown like we just had is that a period of consolidation is ahead.

True, the suddenness and ferocity of the reversal in equity prices plus the fact that for the last two months, the bond, gold and dollar markets have been aggressively pointing to something amiss in Mudville, suggests that there is a chance that there could be more at work here than just a technical selloff.  While their message has been quite powerful, the Averages are going to have to begin breaking major uptrends before it is proven correct.

            Yield curve inverted again.

            Recession tipping point triggered.

            Gold gets hammered on the close.

            Monday in the charts.



Yesterday’s stats were mixed.  The February Dallas manufacturing index was quite disappointing while the January Chicago Fed national activity index was poor but not as much as expected.

Overseas, the February German business climate index came slightly better than anticipated.

            Bottom line: while there were plenty of headlines driving it yesterday, the Market was the main story.   In my opinion, it could easily remain that way until we 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. 

    News on Stocks in Our Portfolios
Bank of Nova Scotia (NYSE:BNS): Q1 Non-GAAP EPS of C$1.83 beats by C$0.08; GAAP EPS of C$1.84 misses by C$0.08.
Revenue of C$8.14B (+7.1% Y/Y) beats by C$110M.

Bank of Nova Scotia (NYSE:BNS) declares CAD 0.90/share quarterly dividend, in line with previous.   

Home Depot (NYSE:HD): Q4 GAAP EPS of $2.28 beats by $0.17.
Revenue of $25.78B (-2.7% Y/Y) in-line.

Home Depot (NYSE:HD) declares  $1.50/share quarterly dividend, 10.3% increase from prior dividend of $1.36.


   This Week’s Data


The February Dallas manufacturing index came in at 1.2 versus expectations of 11.8.

Month to date retail chain store sales declined at the same pace as in the prior week.

The December Case Shiller home price index was unchanged..


            Q4 Japanese leading economic indicators were reported at 91.6, in line.

            Q4 German GDP growth came in at 0.0%, in line.


            How the $23 trillion national debt effects your own money.

                What if rates keep declining?

What I am reading today

            Quote of the day.

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