The Morning Call
4/8/20
The
Market
Technical
Yesterday, the
Averages (22653, 2659) faded a huge
intraday spike to close down. The good
news is that (1) new higher lows have
still been set, leaving the possibility that a bottom has been made and (2)
both remained above the upper boundaries of their short term downtrends [if
they remain there through the close today, the short term trend will reset to a
trading range]. The bad news is that in
that intraday surge, the indices traded near a key Fibonacci retracement level
and retreated markedly---a sign that lower prices are in the offing.
As you know, I
don’t believe a Market bottom has been made; that thesis, technically, is still
hanging by a thread.
It is not the
depth of a recession; it is the duration that determines the drawdown.
BofA: fade the
rip.
Nothing but a
short squeeze.
GLD, TLT and UUP
were all down but nothing changed in their technical picture.
Fundamental
Headlines
Yesterday’
economic data was largely better than expected. The February job openings
report (JOLTS), February consumer credit
rose and the March small business optimism index came in ahead of estimates. On the other hand, month to date retail chain
store sales grew more slowly than in the prior week.
Overseas,
the numbers were all good. February Japanese household spending and its
February leading economic indicators as well as February German industrial
production were above forecasts.
The
coronavirus
Overnight update.
More data on the
coronavirus.
The coronavirus
and global warming.
Half of all small businesses
will close permanently if not allowed to reopen soon.
Food fight over fourth
bailout bill?
EU fails to agree
on coronavirus stimulus measures.
Bottom line: as
the coronavirus infection/death rates peak, we will begin to learn just how
much damage government policy has been done the economy. To be sure, I believe that the hard work and
ingenuity of American workers and businesses will improve what otherwise might
be a tragic situation. However, there is
still pain ahead, the level of which we have no clue. The $64,000 question is, how much of that
pain was priced into stocks at the March 23 low? Until we get an idea of the magnitude and
duration of economic harm, we won’t know.
In the meantime, I think buying equities into a rally is a mistake.
News on Stocks in Our Portfolios
Economics
This Week’s Data
US
Month
to date retail chain store sales grew more slowly than in the prior week.
The
February job openings report (JOLTS) showed a decline of 130,000 openings
versus expectations of a fall of 412,000.
February
consumer credit rose $22.3 billion versus consensus of up $14 billion.
Weekly
mortgage applications fell 17.9% while purchase application were down 12.2%.
International
February
Japanese machinery orders were up 2.3% versus estimates of down 2.7%; its
February trade surplus was Y3168 billion versus forecasts of Y3051 billion.
Other
What
I am reading today
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