Tuesday, March 10, 2020

The Morning Call---Breaking multiple support levels


The Morning Call

3/10/20

The Market
         
    Technical

The Averages  (23851, 2741) got nuked yesterday.  The technical highlights were  (1)  the S&P finishing below [a] its 200 DMA for a second day {now support; if it remains there through the close today, it will revert to resistance}, [b]  the lower boundary of its short term trading range {if it remains there through the close on Wednesday, it will reset to a downtrend} and [c] the lower boundary of its intermediate term uptrend {if remains there through the close on Thursday, it will reset to a trading range, (2) the Dow ending below the lower boundary of its short term uptrend [if it remains there through the close on Wednesday, it will reset to a trading range]. 

Clearly, a horrible day.  While multiple support levels are being taken out, those challenges still need to be confirmed.  And that brings us, as it always does, to follow through.  Short term, stocks got very oversold yesterday; so, some kind of bounce is likely.  Longer term, given the current chaos in the Markets, I have no idea what happens next.

TLT and GLD continued to soar to new highs on big volume while UUP was ripped again, closing below the lower boundary of its short term trading range; if it remains there through the close on Wednesday, it will reset to a downtrend.

    Fundamental

       Headlines

            No economic releases in the US yesterday.  Overseas, Q4 Japanese GDP growth, and capital expenditures were below expectations while private consumption was above.  The January German trade surplus  and industrial production were better than anticipated.

            ***overnight, Xi declares victory in Wuhan.

            ***overnight, White House not ready for roll out of coronavirus counter measures.

            ***overnight, global update on coronavirus.

            Bottom line: as painful as the last couple of weeks have been, it was not unexpected.  Stocks were overvalued, making what is occurring inevitable.  And given that some segments of the Market remain overvalued, I think that more of the same is to be expected.  On the other hand, as I have pointed out, some segments of the Market have been plummeted and now represent great value.

As the decline continues, my strategy is to Buy beaten up stocks gradually until it is obvious that the worst is over.  In my opinion, the worst won’t be over until (1) the peak infections/deaths from the coronavirus has been reached, (2) the Saudis’ and Russians come to an agreement on oil pricing and (3) the Fed stops its unnecessary interference in the capital markets.  (today’s must read):

            More on the liquidity problem.

            Don’t panic.

     Subscriber Alert

            The stock price of 3M (MMM) has fallen into its Buy Value Range.  Accordingly, it is being Added to the Dividend Growth and High Yield Buy Lists.  Both Portfolios own one half positions having Sold one half at higher prices.  At the open this morning, both Portfolios will Add to these positions.

    News on Stocks in Our Portfolios
 
Medtronic (NYSE:MDT) declares $0.54/share quarterly dividend, in line with previous.  

Microsoft (NASDAQ:MSFT) declares $0.51/share quarterly dividend, in line with previous.

Economics

   This Week’s Data

      US

            The February small business optimism index was reported at 104.5, in line.

     International

            February Chinese CPI was +0.8%, in line.

            February Japanese machine tool orders YoY fell 30.1% versus estimates of -22.0%.

            The final Q4 EU GDP growth estimates was +0.1%, in line; employment change was +0.3%, also in line.

    Other

What I am reading today

           

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