The Morning Call---QE wins again

The Morning Call

4/17/20

The Market

         

    Technical

The Averages  (23537, 2799) gave investors a roller coaster ride yesterday, ending on the plus side.  On a positive note, the VIX remains in a very short term downtrend.  Further, both indices ended above the lower boundaries of their very short term uptrends---though just barely.  On the negative side, prices are near being overbought.

The optimists look ahead.

https://www.fisherinvestments.com/en-us/marketminder/non-traditional-data-show-what-stocks-reacted-to

And.

https://www.marketwatch.com/story/its-time-for-scenario-analysis-heres-how-the-stock-market-could-boom-this-year-2020-04-15?mod=home-page

TLT was up big for a second day, leaving its technical picture unchanged (positive) and continuing to point to a weak economy. UUP also rose though it remained near both DMA’s as well as the lower boundary of its short term uptrend (safety trade).   GLD (161.70) was down slightly; some profit taking is not surprising given its recent powerful run.  Still, it finished above the upper boundaries of its very short term and short term uptrends.  The next visible resistance level is at 185.85

http://www.capitalspectator.com/long-treasuries-continue-to-enjoy-monster-gains-in-2020/

Thursday in the charts.

https://www.zerohedge.com/markets/small-caps-crushed-mega-tech-melts-ignore-earnings-implosion-macro-massacre-crude-carnage

    Fundamental

       Headlines

            Yesterday’s stats were again dismal.  March housing starts, weekly jobless claims and the April Philadelphia Fed manufacturing index were quite negative.

            http://www.capitalspectator.com/is-a-v-recovery-still-possible-for-the-us-economy/

            Overseas, the numbers weren’t so bad.  February EU industrial production rose more than anticipated while March German CPI was in line and PPI fell less than expected.

            The coronavirus

           

            ***overnight update.

            https://www.zerohedge.com/geopolitical/wuhan-coronavirus-death-toll-revised-50-higher-remdesivir-trial-revives-hopes-miracle

            Why is the coronavirus shutting the world down when other diseases didn’t?

            https://fivethirtyeight.com/features/why-did-the-world-shut-down-for-covid-19-but-not-ebola-sars-or-swine-flu/

            Financial pandemic.

            https://johnhcochrane.blogspot.com/2020/04/financial-pandemic.html

           

            No progress in congress on replenishing payroll protection plan funds.

            https://www.zerohedge.com/political/mitch-mcconnell-says-absolutely-no-progress-made-replenish-small-business-aid

            The protests begin.

                        Ohio

                        https://marginalrevolution.com/marginalrevolution/2020/04/when-will-the-riots-begin.html

                        Pennsylvania

                        https://thehill.com/homenews/state-watch/493060-pennsylvania-state-senate-votes-to-override-governors-stay-at-home-order

                        Michigan.

                        https://reason.com/2020/04/16/it-figures-that-michigan-is-among-the-first-states-to-see-protests-against-social-distancing/

                        Kentucky.

                        https://www.courier-journal.com/story/news/local/2020/04/16/coronavirus-news-reaction-protests-kentucky-capitol-and-more/5143637002/

            Thoughts from a doomsayer.

            https://www.nakedcapitalism.com/2020/04/lockdown-rebelliousness-denying-that-coronavirus-is-in-charge.html

            How the world will be different.

            https://www.nytimes.com/2020/04/16/upshot/world-economy-restructuring-coronavirus.html

Bottom line: I said yesterday ‘now that the economic data is turning really bad (and as you can see above, we got another day of lousy stats) investors are in a position of either worrying about the fallout from the government shutdown or embracing the Fed’s aggressive stimulus policy.  If history repeats itself, the latter will win out (which yesterday’s pin action supports).  That said, I have maintained for years that the mispricing and misallocation of assets will end at some point.  Though again, if history repeats itself, it remains a low probability bet.  So, for the moment, I think that the bias of the Market is to the upside; although in the absence of a coronavirus cure or vaccine, the almost assured poor economic numbers will likely make any progress erratic.  I have no intent of chasing stock prices in that environment.’

https://www.zerohedge.com/markets/first-time-ever-fed-will-monetize-double-total-treasury-issuance

            Dividend cuts at the midpoint of April.

            https://politicalcalculations.blogspot.com/2020/04/dividend-cuts-at-midpoint-of-april-2020.html#.XpidFMhKg2w

            The latest from Ed Yardini.

            http://blog.yardeni.com/2020/04/from-reach-for-yield-to-mad-dash-for.html

    News on Stocks in Our Portfolios

 

Procter & Gamble (NYSE:PG): Q3 Non-GAAP EPS of $1.17 beats by $0.04; GAAP EPS of $1.12 misses by $0.05.

Revenue of $17.21B (+4.6% Y/Y) misses by $80M.

Economics

   This Week’s Data

      US

           

     International

            Q1 Chinese GDP growth was -6.8% versus estimates of -6.5%; February industrial production was -0.3% versus +0.4%; capacity utilization was 67.3% versus 75.0%.

February EU YoY construction output was -0.9% versus forecasts of +1.1%; CPI was 0.5%, in line.

    Other

            Business inflation expectations decline in April.

            https://www.frbatlanta.org/research/inflationproject/bie.aspx

            US port volumes down.

            https://www.zerohedge.com/economics/unprecedented-disruption-supply-chains-slams-us-port-volumes

What I am reading today

            Quote of the day.

            https://cafehayek.com/2020/04/quotation-of-the-day-3132.html?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+CafeHayek+%28Cafe+Hayek%29

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