The Morning Call
3/13/20
The
Market
Technical
The Averages (21200, 2480) continued their Thelma and
Louise formation and, in the process, got more oversold. The pin action had all the markings of a giant
margin call. So, somewhere in here the liquidation
halt, at least temporarily, and a bounce is going to happen. The technical highlights included (1) the
S&P finishing below [a] the lower boundary of its short term trading range
for a second day; if it remains there through the close today, it will reset to
a downtrend and [b] the lower boundary of its intermediate term uptrend for a
second day; if it remains there through the close next Monday, it will reset to
a trading range and (2) the Dow ending below the newly reset lower boundary of
its short term trading range; if it remains there through the close on Monday,
it will reset to a downtrend.
What happens after
a waterfall formation?
On a positive
note.
What is the VIX
telling us?
TLT, GLD and UUP maintained
the major reversals that began on Tuesday.
TLT and GLD fell but their charts remained positive. UUP continued to rally.
https://www.zerohedge.com/markets/here-what-was-behind-yesterdays-unprecedented-treasury-dislocation
The question
remains ‘are the reversals in TLT, GLD and UUP just a trading blip or are they
starting to forecast a major change/incident in the economy as they did from
late 2018 to their recent peak (low)?’ ---for instance, a
Market rattling credit/liquidity event which would explain higher yields, lower
gold prices and a strong dollar.
Thursday in the charts.
Fundamental
Headlines
Yesterday’s
numbers were upbeat. The February budget
deficit was less than anticipated; February PPI came in well below expectations
(I think that a plus; the Fed doesn’t); and weekly jobless claims fell versus
an expected increase.
Overseas,
the data was also positive. February
Japanese PPI fell more than estimates
while January EU industrial production was above consensus.
Is a recession
inevitable?
The risks.
The
Fed.
The Fed pulled out
its bazooka yesterday, injecting a massive dose liquidity into the financial
system and got a giant raspberry from the Market. More evidence of the Market’s loss of faith
in the Fed.
Corporate debt.
Where the credit risks are about to blow.
The danger of corporate America’s debt binge.
Bottom line: We
know the risks; and we know that investors are now fully aware of them. The question is, how much is in the price of
stocks? Clearly, yesterday’s pin action
is telling us that so far ‘not everything’.
I am not smart enough to know when all will be discounted. But I do have a price discipline---when
the stocks of companies that you want to own are down 50% or more and/or are
selling into their Buy Value Ranges, that is the time to put cash reserves to
work---you know sell high, buy low. That
said, I am no Market timing guru; so, a slow steady buy program on down days is
the best I can do at buying low.
Different kinds of
declines.
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will purchase a one half position at the Market open.
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