The Morning Call
3/17/20
The
Market
Technical
The Averages (20188, 2386) plummeted again yesterday
continuing the technical damage. The
S&P finished below the lower boundary of its intermediate term uptrend for
a fourth day, resetting to a trading range
The Dow ended back below the newly reset lower boundary of its short
term trading range,; if it remains there through the close on Wednesday, it
will reset to a downtrend.
TLT, GLD and UUP continued
their volatility. TLT remained positive, ending back above the
upper boundary of its intermediate term uptrend. GLD is still being sold, finishing below its
100 DMA for a second day and below its 200 DMA.
The UUP was pounded, closing back below its 100 and 200 DMA---the second
reversal in as many days.
The question no
longer includes whether what is occurring with TLT, GLD, UUP is a trading blip but remains 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.
Monday
in the charts.
Fundamental
Headlines
The economic impact
of the coronavirus is starting to show up in the numbers. In the US, the March NY Fed manufacturing
index fell off the cliff.
Goldman sees GDP
shrinking 5% in second quarter.
Overseas,
January/February Chinese YTD fixed asset investments, industrial production and
retail sales were horrible. The one
bright spot was January Japanese machinery orders which were better than
expected.
The
main headline of the day was the howitzer the Fed fired over the weekend. I covered that in yesterday’s Morning
Call.
Why the F/X swap
lines that the Fed created are so important.
Central banks pull
out all stops.
But none of this
is solving the problem---repo market remains frozen.
***overnight
developments on the coronavirus.
Thoughts on the
coronavirus crisis from Greg Mankiw.
Fatality estimates
in the US.
***overnight,
White House unveils $850 billion rescue package.
Bottom line: yesterday’s
terrible pin action was the third time that the Fed has plowed money into the
financial system and the Market didn’t care.
I think it reasonable to assume that the Fed put is now dead---which I have
long thought would mark the beginning of the end of the mispricing and
misallocation of assets. I am not smart enough
to know how much of the Fed puts premium remains in equity prices. But clearly it is being removed with a vengeance.
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.
Levels of losing.
Subscriber Alert
The
stock price of CVS Health Corp (CVS) has traded into its Buy Value Range. Accordingly, it is being Added to the
Dividend Growth Buy List. At the Market
open, the Dividend Growth Portfolio will Buy a one-half position in CVS.
News on Stocks in Our Portfolios
Economics
This Week’s Data
US
February
retail sales fell 0.5% versus expectations of a 0.2% increase; ex autos, they
declined 0.4% versus +0.2%.
International
January
Japanese industrial production rose 1.0% versus consensus of +0.8%; capacity
utilization was +1.1% versus -0.5%.
January
UK unemployment was 3.9% versus estimates of 3.8%; average earnings were up
3.1% versus +3,8%.
March
EU economic sentiment came in at -49.5 versus forecasts of -36; German economic
sentiment was -49.5 versus -26.4.
Other
Latest
numbers on restaurant traffic.
What
I am reading today
Images
from the underwater photographer of the year contest.
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