The Morning Call
4/7/20
The
Market
Technical
Yesterday, the
Averages (22679, 2663) made a Titan III shot,
though improvements in volume and breadth were not that impressive. Nonetheless, (1) a higher low has been set and
creates the possibility that a bottom has been made and (2) both closed above
the upper boundaries of their short term downtrends [if they remain there
through the close on Wednesday, the short term trend will reset to a trading
range].
As you know, I don’t
believe a Market bottom has been made---though that thesis, technically, is now
hanging by a thread.
GLD spiked
yesterday, likely driven by fears of inflation resulting from the current massive
monetary infusion/government spending. TLT
and UUP moved fractionally, indicating nothing.
Monday in the
charts.
Fundamental
Headlines
No US data
reported yesterday.
Congress/White House
now working on yet another $1 trillion bailout.
Overseas, the
February German and EU construction PMI’s were less than anticipated as
well as March Japanese consumer
confidence. On a slightly brighter note,
February German factory orders were better than expected.
The
coronavirus
***overnight
update.
Courting economic devastation.
When computer
models create mayhem.
American ingenuity
in a post pandemic world.
Are ‘immunity
certificates’ coming?
You can’t believe
the Chinese.
The
Fed
The Fed will now
back stop the SBA Payroll Protection Plan loans.
Yellen disavows responsibility
for consequences of QE.
Bottom line: the
improving coronavirus infection/death rates in Europe as well as New York are providing
some initial visibility to the end of the health crisis which in turn will allow analysts to sharpen their pencils
and begin the process of assessing the economic consequences of this crisis. Not that there is absolute clarity yet; but uncertainty
will begin to fade and the discounting of those negative consequences to
commence. That is a plus for the Market.
That
said, my opinion is that yesterday’s moon shot was more a reflection of investor’s
relief that fewer people may die and economic uncertainty will begin to decline
rather than any approximation of the ultimate level of 2020/2021 corporate earnings,
the impairment done to corporate balance sheets and the numerous other potential
impacts from the aggressive Fed monetary and the government fiscal policies. In short, relief that the end may be in sight
but with little idea what the end looks like yet. Not that I know. But my point is that the discounting of the
ultimate damage to the economy is only starting, meaning we still have no idea
how ugly the results will be.
So, while the
technical picture may be improving, I think that we have to be concerned that
the potential damage to the economy may be much worse than currently reflected in
equity prices, i.e. don’t chase stock prices up. (must read)
Attempts to go
back to normal will be futile.
Ugly choices lie
ahead.
More on valuations.
News on Stocks in Our Portfolios
Economics
This Week’s Data
US
The
March small business optimism index came in at 96.4 versus estimates of 95.
International
February
Japanese household spending was up 0.8%
versus consensus of -0.2%; February leading economic indicators were 92.1
versus 90.4.
February
German industrial production was up 0.3% versus forecasts of -0.9%.
Other
OPEC
meeting delayed.
The
smart money is buying oil.
Framing
lumber futures prices down 25%.
What
I am reading today
Bizarre lifeforms found
in rocks beneath sea.
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