Friday, March 27, 2020

The Morning Call---Resistance and support levels


The Morning Call

3/27/20

The Market
         
    Technical

The Averages  (22552, 2630) had their third good day in a row.  Clearly, momentum has, at least, temporarily halted their move to the downside.  And the indices still have room to move to the upside before they challenge the upper boundaries their short term downtrends (~23272/2757).  It is entirely possible that they could do so given the huge buyside that exists in the institutional rebalancing that will occur at quarter’s end.

That said, 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 this condition has almost been corrected, (2) the VIX is not reflecting a reduction in risk adverseness among investors, (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.  There is almost no visible support until ~ 15399/1810. 


TLT, GLD and UUP continued their volatility.  Gold and the long bond rose while the dollar took a beating---which may be an indication of a lessening in the dollar funding shortage.

Thursday in the charts.

    Fundamental

       Headlines

We could see signs of the impact of the coronavirus in yesterday’s numbers.  Weekly jobless claims were horrible while the March Kansas City Fed manufacturing index, the February trade deficit and February wholesale inventories are reflected economic weakness.  The final reading on Q4 GDP was in line but irrelevant.

            Overseas, February UK retail sales and April German consumer confidence were both well below expectations.

            All eyes remain on the spread of the coronavirus.

            The shutdown is killing the economy.

            We need to be talking about how this crisis ends.

            Safety protocols.

            More on data analysis.

            The coronavirus in New York.

            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.

            Finding the weak spots.

            Bargains in the muni market.

     Subscriber Alert

            One of the main pillars of my investment strategy is to Buy/Own the stocks of companies that consistently raised their dividends, the obverse of which is to avoid non-dividend paying companies, those don’t consistently raise their dividends and those that have cut their dividends.  This week, Boeing eliminated its dividend.  While the company is faced with its own idiosyncratic problems that might justify giving it a reprieve, management of the company had a role in those difficulties (i.e. sloppy engineering on the 737 Max and spending billions that could be used to pay dividends on buying back stock which, incidentally, greatly enriched that management). 

            The stock has bounced hard in the latest rally.  Accordingly, the Dividend Growth Portfolio will use that price advance to Sell its Holding of BA.

    News on Stocks in Our Portfolios
 
           

Economics

   This Week’s Data

      US

            The March Kansas City Fed manufacturing index was reported at -18 versus consensus of +2.

            February personal income was up 0.6% versus estimates of +0.4%; personal spending was up 0.2%, in line.

            The February core PCE price index rose 0.2%, in line.

     International

            February Chinese YoY industrial profits fell 38.3% compared with the January reading of -3.3%.

    Other

            Is inflation in our future?

            Hotel occupancy rate declines to all-time low.

What I am reading today

           

Visit Investing for Survival’s website (http://investingforsurvival.com/home) to learn more about our Investment Strategy, Prices Disciplines and Subscriber Service.




No comments:

Post a Comment