The Morning Call
2/5/20
The
Market
Technical
The Averages (28807,
3297) continued their rebound yesterday.
However, they moved out of oversold territory and the VIX remains at a
more elevated level than I would expect (slight technical negatives). On the other hand, the money flows are very positive
and longer term the indices are technically strong (above both MA’s and in
uptrends against all major timeframes).
For directional information,
I am now watching resistance at the former indices highs (29373/3337) on the
upside and support at their 100 DMA [27661/3098] and the lower boundaries of
their short term uptrends [24696/3058] on the downside.
While yesterday’s
pin action in TLT, GLD and UUP ran counter to their current trends (continued sluggish
economy), it was not significant enough to yet question that scenario.
Tuesday in the
charts.
Technical
thoughts.
Fundamental
Headlines
The numbers were
again positive yesterday. Month
to date retail chains store sales as well as December factory orders (and ex
transportation) were upbeat.
Overseas,
December EU PPI came in flat, in line.
China tripled down
on stimulus.
The other item
worth mentioning is the screwup in the Iowa democratic caucus vote. As you know, I refrain from political
commentary. But anything that helps
Trump versus the dem’s I believe is good for the Market (to be clear, I am not
opining on the economy, the climate, the social fabric, etc.; just the Market because
that is my focus). And to be fair, it also
appears that even the dems think that this fiasco was a big negative.
Bottom
line. I am not sure how much of yesterday’s
rocket ride can be attributable to (1) a bounce off an oversold condition, (2) massive
pump priming effort by the Chinese government or (3) the help rendered to Trump
by the Iowa caucus debacle. But clearly,
coronavirus fears were at least temporarily assuaged---'temporarily’ being the
operative word.
None
of this changes the valuation math. Economic
and earnings growth are struggling---not falling but not ‘lifting off’. Stock prices for large segments of the Market
are valuing profits generously. It is
among those equities that I am monitoring as a source of funds when they (1) have
reached their Sell Half Range and/or (2) failed to meet their minimum financial
criteria for inclusion in our Universe. In the midst of a significant up move
to record levels, those are candidates for sale.
However, there
are other industry groups that have been hammered and certain stocks within those
groups are at or near our Buy Value Ranges.
Our Portfolios will be Buying from that group in periods of weak stock
prices.
January dividend
by the numbers.
Buffett on Aesop
and Cinderella.
News on Stocks in Our Portfolios
Economics
This Week’s Data
US
Month
to date retail chains store sales grew faster than in the prior week.
December
factory orders rose 1.8% versus expectations of up 1.2%; ex transportation,
they were up 0.6% versus +0.2%.
Weekly
mortgage applications rose 5.0% but the more important purchase applications
fell 9.5%.
The
December US trade deficit was $48.9 billion versus forecasts of $48.2 billion.
The
January ADP private payroll report showed job growth of 291,000 jobs versus
estimates of 154,000 jobs.
International
The
January Japanese services PMI was 51.0 versus consensus of 52.1; the composite
PMI was 50.1 versus 51.1; the January Chinese Caixin services PMI was 51.8
versus 52.6; the composite PMI was 51.9 versus 51.1; the January German services
PMI was 54.2, in line; the composite PMI was 51.2 versus 51.1; the January EU
services PMI was 52.5 versus 52.2; the composite PMI was 51.2 versus 50.9; January
UK services PMI was 53.9 versus 52.9; the composite PMI was 53.3 versus 52.4.
Other
The
global manufacturing PMI at nine month high in January.
January
heavy truck sales down.
What
I am reading today
Two groups that face the highest
audit rate.
What makes a good car in the snow?
It never feels like the right time
to invest.
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for Survival’s website (http://investingforsurvival.com/home)
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