The Morning Call
3/26/20
The
Market
Technical
The Averages (21200, 2475) see sawed through the day,
ending to the upside, though little changed technically speaking. Momentum remains undeterred to the downside
with almost no visible support until ~ 15399/1810.
I still think the
evidence points at the current up move being a rally in a bear market versus a
bounce off of a bottom: (1) stocks remain oversold, though clearly less so than
on Monday, (2) the VIX is not reflecting a reduction in risk adverseness among investors;
indeed, the VIX was actually up yesterday [the second time in as many days],
(3) both indices experienced gap up opens on Tuesday [which need to be filled]
and (4) some of the most powerful rallies occur during bear markets.
TLT, GLD and UUP continued
their volatility, yesterday to the downside, suggesting a rejection of their
role as a safety. Nonetheless, their
charts remained technically strong
And.
And.
Wednesday in the
charts.
Fundamental
Headlines
Yesterday’s data
was mixed. Weekly mortgage and
purchase applications declined---reflecting the effects of the
coronavirus. However, February durable
goods orders were better than anticipated, though ex transportation, they were worse.
Overseas,
the stats were also mixed. February UK
CPI and core CPI were above expectations while retail sales were in line; the March
German business climate index came in below estimates.
Other
headlines:
(1)
it appears that the $2 trillion stimulus package
will be enacted, though there was a last minute hitch late yesterday afternoon.
***overnight,
bill passes senate.
More details on
the $2 trillion stimulus package.
Clarity on the
buyback ban.
$5 trillion down
the drain.
(2)
we are starting to get some decent analysis on the
progress of the coronavirus and the economic impact of the disease/political
reaction.
***overnight
update.
The
unintended consequences of an economic shutdown.
If you really want
to be depressed.
Coronavirus
overreaction.
More data.
Still more data.
Thoughts on data analysis.
Is Italy over the
hump?
(3)
in yesterday’s Morning Call, I opined that in light
of the Fed’s QEInfinity on steroids, my concerns about problems in the
corporate credit market as well as those associated with the dollar funding shortage
were likely to be somewhat mitigated.
Others disagree.
***overnight,
Powell does interview on NBC.
Fed
buying everything in sight.
Japanese QE on
verge of failing.
So is US QE.
There are still problems
in the corporate credit market.
A solution for our
unpayable corporate debt.
Bottom line. each day
that passes, we get a better feel for the progress of the infection/death rate
of the coronavirus. Not that we have a
clear picture of how to properly react.
But the more information we have, the more likely the right protocols
can be discerned to balance medical health with economic health. The major question is, will the ruling class
make the right decision or demagogue the issue for their own benefit. Regrettably, I don’t have the answer.
Insolvency
in the corporate debt and dollar denominated foreign debt market remains a huge
risk to the financial markets. Until
there is more clarity on this problem, downside risks remain to the securities
markets.
The Market won’t return
to January 2020 levels anytime soon.
News on Stocks in Our Portfolios
Revenue of $1.14B (+6.5% Y/Y) in-line.
FactSet Research Systems (NYSE:FDS):
Q2 Non-GAAP EPS of $2.55 beats by $0.06; GAAP EPS of $2.30 beats
by $0.04.
Revenue of $369.78M (+4.2% Y/Y) in-line.
Economics
This Week’s Data
US
Weekly
jobless claims rose to 3.3 million versus expectations of 1.0 million.
The
February trade deficit was $58.9 billion versus consensus of $68.9 billion.
February
wholesale inventories declined 0.5% versus projection of 0.0%.
The
final Q4 GDP growth estimate was 2.1%, in line.
International
February
UK retail sales fell 0.3% versus estimates of +0.2%; ex fuel, they were -0.5%
versus -0.2%.
April
German consumer confidence came in at 2.7 versus forecasts of 7.1
Other
Saudi
Arabia’s radical new oil strategy.
China
to resume US LPG imports.
What
I am reading today
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