The Morning Call
2/28/20
The
Market
Technical
Despite being as
oversold as I can remember, the Averages (25766, 2978) continued their waterfall formation. (1) the Dow ended below its 200 DMA for a third
day, [now support; if it remains there through the close today, it will revert
to resistance] and (2) the S&P finished below [a] its 100 DMA for a third
day, reverting to resistance, [b] the lower boundary of its short term uptrend for
a second day {if it remains there through the close today, it will reset to a
trading range} and [c] its 200 DMA {now support; if it remains there through the
close next Tuesday, it will revert to resistance}.
So, the indices
continue to relentlessly chew through resistance level after resistance level
getting evermore overextended to the downside.
The latter point suggests that some kind of relief rally on a very short
term basis. But the overall technical
condition of the Market is in such poor shape that I think it likely that lower
prices are part of our future.
Supporting this
conviction, the pin action in the long bond and gold continues to reflect their
investors’ desire to embrace the ‘safety trade’. To be sure, the dollar was weak yesterday---breaking
below the lower boundary of its very short term uptrend. This is the first crack in that (TLT, GLD,
UUP) ‘safety trade’ wall. So, it needs
to be monitored; but it is too soon to dismiss the need for the ‘safety trade’.
Thursday in the
charts.
Fundamental
Headlines
Yesterday’s numbers
were weighed to the upside. January pending home sales, January durable goods
orders/ex transportation and the February Kansas City Fed manufacturing index were
better than expected while the Q4 second estimate of GDP growth was in line and
weekly jobless claims were disappointing.
February
EU business confidence and economic sentiment were ahead of forecasts while consumer
confidence and services sentiment were in line.
Again, the coronavirus
was the principal non Market headline of the day.
The latest on the
coronavirus.
***overnight.
Bottom line: the
Market remains tormented by a list of unknowns;
(1)
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. We don’t even know when the
negative infections/deaths headlines will peak,
(2)
we still don’t know what the TLT, GLD and UUP
markets were discounting in the initial phase of the early December to present
moon shot [remember they started their tear long before we ever heard of the
coronavirus]; though my speculation is that they foresaw a global recession. The coronavirus simply made things worse
which implies a 2020 economy much weaker than many expect even assuming we get
the virus under control within a reasonable timeframe,
(3)
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 [i.e.
what benefit is lower rates when global interest rates are declining; and what
benefit is QEV, when NotQE doesn’t seem to have done much to halt the latest
decline?] and/or will the Market care?
Former Dallas Fed head Fisher says repeal the ‘Fed
put’.
Laguard was also out with ‘non dovish’
comments.
Are institutional
investors ‘panic holding’?
Is it over yet?
Is the stock market
going to crash?
Subscriber Alert
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being Added to the Dividend Growth Buy List. The
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News on Stocks in Our Portfolios
Economics
This Week’s Data
US
January
pending home sales rose 5.2% versus expectations of +2.2%.
The
February Kansas City Fed manufacturing index came in at +8 versus projections
of -5.
January
personal income rose 0.6% versus consensus of +0.3%; personal spending was up
0.2% versus +0.3%.
The
January trade deficit was $65.5 billion versus forecasts of $72.9 billion.
January
wholesales inventories fell 0.2% versus estimates of -0.6%; sales also
declined.
January
core PCE came in at +0.1% versus an anticipated increase of 0.2%.
International
January
Japanese retail sales rose 0.6% versus estimates of +2.4%; industrial
production was up 0.8% versus +0.2%; housing starts YoY fell 10.1% versus
-6.1%.
February
UK consumer confidence was -7 versus forecasts of -8.
February
German unemployment was 5%, in line; CPI was +0.6% versus +0.4%.
Other
What
I am reading today
Radical
hydrogen/boron reactor leapfrogs nuclear fusion technology.
Quote of the day.
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