The Morning Call
4/9/20
The
Market
Technical
Yesterday, the
Averages (23433, 2749) spiked but were
able to hold on to most of the gain. 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 closed above the upper boundary of their short term downtrend for the
third day, resetting their short term downtrends to trading ranges
[18210-29540, 2188-3398]. The bad news
is that despite a strong performance, they traded through then faded that key
Fibonacci retracement level that I mentioned yesterday. Many technicians look at that level as resistance;
so, they will be watching closely for signs of an interim top.
Just a bear market rally?
Bear markets need
time to develop (must read).
As you know, I
don’t believe a Market bottom has been made; but that thesis, technically, is near
death.
GLD, TLT and UUP all
traded fractionally within their prior close.
The one thing to note is that gold slipped below the upper boundaries of
its very short term and short term uptrends, leaving them as a restraint to the
rate of advance on GLD prices.
Wednesday in the
charts.
Fundamental
Headlines
Wednesday was a
light day for data releases. In the US,
weekly mortgage and purchase applications were down. Overseas,
February Japanese machinery orders and its February trade surplus were
better than anticipated.
Mounting evidence that
a global recession started in March.
What shape will
the recovery be?
The
doomsday scenario.
The
Fed released the minutes from its last FOMC meeting. As you might expect, it was worried about the
economy, bond market, corporate liquidity, Tom Brady’s contract, my granddaughter’s
sniffles, not enough red M&M’s in a package, etc., etc., and promised to
throw the kitchen sink and anything else that it can get its hands on at any problem. Here are the minutes if you want to read
them.
And in the interest of not wasting any time---The
Fed’s newest program.
The coronavirus
***overnight update.
FDA
fast tracks coronavirus treatment.
Visualizing the
first four weeks of the coronavirus.
https://politicalcalculations.blogspot.com/2020/04/visualizing-first-four-weeks-of.html#.Xo4C1IhKg2w
Forecasts in the
time of the coronavirus.
One of the things
we are all trying to do is get a handle on the changes that will occur in the
economy/society when the coronavirus is defeated. While I would not call the coronavirus a
plague or an epidemic, there has been some scholarly work on their aftermath
effects on society. Here is one.
https://www.zerohedge.com/health/when-plagues-pass-slower-growth-social-unrest-labor-gets-upper-hand
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.
JP Morgan halts
all nongovernment guaranteed small business loans.
News on Stocks in Our Portfolios
Economics
This Week’s Data
US
Weekly
jobless claims rose 6,606,000 versus expectations of up 5,250,000.
March
PPI came in at -0.2% versus estimates of -0.4%; core PPI was +0.7% versus
+0.5%.
International
The
February German trade balance was +E20.8 billion versus consensus of +E18.2
billion.
The
February UK trade balance was -L2.8 billion versus forecasts of +L2.2 billion;
February industrial production was +0.1%, in line; manufacturing production was
+0.5% versus +0.1%; GDP was -0.1% versus +0.1%.
March
YoY Japanese machine tool orders fell 40.8% versus projections of -37.0%.
Other
Increasing
prospects for a cut in oil production.
What
I am reading today
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