Friday, March 6, 2020

The Morning Call---The S&P 200 DMA seems like line in the sand

The Morning Call


The Market

The Averages  (26121, 3023) continued their extremely volatile pin action---now putting the Six Flag’s Texas Tornado to shame.   Yesterday’s technical highlight was the S&P finishing back below its 200 DMA (now support; if it remains there through the close on next Tuesday, it will revert to resistance).  It is beginning to look like the S&P 200 DMA has become the battle line in this Market; that is, if the S&P keeps bouncing off it, the worse may be over; if it successfully challenges this level, then 25047/2855 looks like the next stop.

TLT and GLD aggressively resumed their push to new highs while UUP was ripped again.  So, nothing changed technically including my confusion over their dramatically mixed performance  (***see below).

            Thursday in the charts.



The dataflow yesterday was mixed.  Q4 nonfarm productivity was below projections but so was unit labor costs;  January factory orders fell more than anticipated but ex transportation they fell less;  weekly jobless claims declined less than expected.

JP Morgan’s Global Composite Output Index declined sharply in February.

            Forward looking components of economic activity.

            Overseas, the February German construction PMI was better than expected.
            Are the Chinese faking the numbers (again)?

            The coronavirus.

The coronavirus has created both demand and supply shocks.
                        ***overnight update.

            The Fed.        

The Fed in a corner.

                        Are negative rates now guaranteed?
                        This helps explain what is going on in the various markets.  US banks are selling dollars (dollar down) to buy yen to invest in long bonds (bonds up) and not stocks (stocks down).

            Bottom line: the two most important factors for the Market, in my opinion, is (1) when it believes that the globe in witnessing peak coronavirus infections/deaths.  Once that occurs, uncertainty starts to dissipate and estimates can began on the economic impact of the virus, and (2) when it loses faith in the Fed ‘put’.  Tuesday’s pin action suggested that the process may have begun.  Time will tell.  Irrespective of that, the Fed is nearly out of bullets.  What happens when it is all out and the economy really needs easier monetary policy?

            The latest from Jeff Gundlach.

    News on Stocks in Our Portfolios


   This Week’s Data


            Q4 nonfarm productivity was up 1.2% versus expectations of +1.4%; unit labor costs rose 0.9% versus +1.4%.

            January factory orders fell 0.5% versus forecasts of -0.1%; ex transportation they were -0.1% versus -0.2%.

            Weekly jobless claims declined 3,000 versus consensus of down 4,000.

            February nonfarm payrolls grew by 273,000 versus an anticipated increase of 175,000.


            The February German construction PMI was reported at 55.8 versus estimates of 54.2.

            January Japanese household spending YoY was down 3.9% versus projections of -4.0%; cash earnings were up 1.5% versus 1.3%.  January leading economic indicators were 90.3 versus 91.9.


What I am reading today

            Massive white dwarf star poses mystery.

            How books improve our mental health.

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