Thursday, March 19, 2020

The Morning Call--Markets not impressed

The Morning Call


The Market

The Averages  (19898, 2398) gave a thumbs down to Tuesday’s Fed and the White House moves to solve the coronavirus problem.  The S&P remained in its newly reset intermediate term trading range. The Dow ended below the newly reset lower boundary of its short term trading range for a third day, resetting to a downtrend.   Next technical support 15399/1810; but very short term, stocks are quite oversold.

TLT, GLD and UUP continued their volatility.  TLT continued Tuesday’s plunge but remained above both DMA’s and the lower boundaries of its short term and intermediate term uptrends.  GLD did another reversal finishing back below its 200 DMA (it is still below its 100 DMA).  The UUP spiked again, closing back above its 100 and 200 DMA’s and the upper boundary of its short term treading range---if it remains there through the close on Friday, it will reset to an uptrend. 

***overnight, Treasury mulls 50 year bond.

The question remains, are TLT, GLD and UUP reflecting a coming 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.
This is what a $12 trillion margin call looks like.

            Wednesday in the charts.


Yesterday’s numbers were disappointing.  Weekly mortgage and purchase applications were down.  February housing starts dropped but were better than anticipated while building permits were worse.

            Update on big four economic indicators.

            Big 3 automakers shutter US plants.

            Overseas, the January EU trade surplus less than expected while its February CPI was in line.  The February Japanese trade surplus was larger than estimates.

            The major headline of the day was the senate passing a coronavirus aid package (which had already been voted in the house).  It will certainly help get the country through this crisis, though it will ultimately add to inflationary pressures.

            Coronavirus perspective.

            ***overnight update.

            ***overnight, Germany to suspend debt break on Monday.

            ***overnight, Fed unveils another bailout fund.

                        ***overnight, ECB fires its own bazooka.

            That said, I continue to believe that the real problem is solvency of the credit markets which the Fed has yet to figure out how to remedy.

            More problems in the credit market.

            Boeing: A great example of the misallocation of assets.

            What the ECB still needs to do.

            Bottom line.  My strategy remains: 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.

Equity wealth and consumption.


    Subscriber Alert

            The stock price of Cisco Inc (CSCO) has traded into its Buy Value Range.  According, it is being Added to the High Yield Buy List.  At the Market open, the High Yield Portfolio will Buy a one half position in CSCO.

            The stock price of Paychex Inc (PAYX) has traded into its Buy Value Range.  The Dividend Growth Portfolio owns a one half position, having Sold Half earlier.  At the Market open, the Dividend Growth Portfolio will Buy a one half position in PAYX.

    News on Stocks in Our Portfolios
Accenture (NYSE:ACN): Q2 GAAP EPS of $1.91 beats by $0.18.
Revenue of $11.14B (+6.6% Y/Y) beats by $40M.

Accenture (NYSE:ACN) declares $0.80/share quarterly dividend, in line with previous.


   This Week’s Data


            Weekly jobless claims rose 71,000 versus expectations of up 9,000.

            The March Philadelphia Fed manufacturing index was reported at -12.7 versus forecasts of +10.

            The Q4 trade deficit was $109.8 billion versus projections of $109.0 billion.


            January EU YoY construction output rose 6.0% versus consensus of +1.3%.

            February Japanese CPI YoY was up 0.6%, in line; ex food and energy, it was up 0.6% versus 0.9%.
            The March German preliminary business climate index came in at 87.7 versus estimates of 88.0.


            Crude oil prices continue to plunge.

What I am reading today


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