Wednesday, February 19, 2020

The Morning Call--Yesterday's pin action did little technical damage

The Morning Call


The Market

The Averages (29232, 3370) were down yesterday---the Dow enough to close back below its former high (29337).  For the moment, I am going to continue to posit that it remains in a very short term uptrend; though, it is a weakly held assumption.  Contributing to that notion is the VIX closing back above both DMA’s (now support), voiding last week’s move below those levels and suggesting that investors continue to be more risk averse than is apparent in the indices’ pin action.

GLD,  TLT and UUP maintained their strong move as safety trades.  UUP ended above the upper boundary of its short term downtrend for a third day, resetting its short term trend to a trading range.  And GLD made a new higher high on volume.

                There remains an apparent dichotomy between the economic expectations of equity investors and those in GLD, TLT, and UUP.  Somebody is going to be wrong.

            Tuesday in the charts.



One datapoint yesterday.  The February NY Fed manufacturing index was better than anticipated.

Latest Q1 nowcasts.

            Overseas, the stats were generally disappointing. Q4 Japanese GDP growth, capital expenditures and private consumption along with December industrial production, February EU and German economic sentiment and December UK average earnings were below estimates; while the December UK unemployment rate was in line and its Q4 productivity was above forecast.

            The other headline of the day was Apple’s lowering forward guidance due to the impact of the coronavirus on its China operations.

            But doesn’t that mean more QE?

            Bottom line: as you know, I believe that the coronavirus will have a short shelf life---which in an investment sense means that its economic impact will dissipate as 2020 progresses.  Of course, there is as yet no evidence that this will be the case.  So, it makes sense to me not to be making big bets at this point in time on the ultimate effect. 

            While GLD, TLT and UUP investors appear to agree, the stock boys continue to buy, leaving equity prices for large segments of the Market at or near record highs.  If you haven’t used this opportunity to build some cash reserves, I would begin doing so.

            The latest Fund Manager Survey.

            When government deficits meet NotQE.
            Doom and gloom from Nouriel Roubini.

            The silly season.

    News on Stocks in Our Portfolios


   This Week’s Data


            The February housing index came in at 74 versus estimates of 75.

                        Weekly mortgage applications dropped 6.4% while purchase applications were down 3.4%

                        January housing starts declined 3.6% versus projections of -12.3%; building permits rose 9.2% versus flat.

            January PPI was +0.5% versus forecasts of +0.1%, core PPI was also +0.5% versus +0.1%.


            The January Japanese trade deficit was Y1312 billion versus consensus of -Y1694 billion; December machine tool orders were off 12.5% versus -9,0%.

            The January UK CPI came in at -0.3% versus expectations of -0.4%; core CPI was -0.6%, in line.

            December EU YoY construction output fell 3.7% versus forecasts of +1.4%.


            Is the monetarist fantasy over?

            Siphoning off World Bank largess.

What I am reading today

            This is a pretty interesting background article on the locust plague in the Horn of Africa.  I pose the question, if this plague is the result of climate change what caused the plague Moses imposed on Egypt.  Before you say God, think about the implications.

            What economists think of our health care system.

                Improving from the ground up.

            The US, Russia, Europe and nuclear war.

            The perils of ‘survivorship bias’.


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