The Morning Call
4/17/18
The
Market
Technical
The indices
(DJIA 24573, S&P 2677) were up yesterday on lower volume and improved
breadth. The Dow closed above the upper
boundary of its very short term downtrend (if it remains there through the
close today, the trend will be negated).
However, the S&P ended below its comparable trend line. Both of the
Averages closed below their 100 day moving averages (now resistance). They both remain above their 200 day moving
averages. The DJIA finished in a short
term trading range but in intermediate and long term uptrends. The S&P is in uptrends across all
timeframes. The short term technical picture remains cloudy, but could
potentially be improving. Longer term,
the assumption is that equity prices will continue to rise.
The
world is so safe that no one hedges anymore
Hedge
funds deleveraging (medium):
The VIX was down another 5
%, finishing above the lower boundary of its very short term uptrend (if it
remains there through the close today, the trend will be negated). Still it ended above its 100 and 200 day
moving averages and the lower boundary of its short term trading range.
The long
Treasury was up fractionally, remaining within what is now a strong two month
long bounce (very short term uptrend) off the lower boundary of its long term
uptrend. On the other hand, it
continues to trade below its 100 and 200 day moving averages and in a short
term downtrend. It is starting to get
squeezed between the lower boundary of its very short term uptrend and its
moving averages. A break in this
narrowing range would likely point at a further move in the direction of the
break.
The dollar fell,
finishing below its 100 and 200 day moving averages and in an intermediate term
downtrend. UUP continues to trade in a
very tight range, which is not usual when bonds are moving big directionally.
GLD was up,
finishing above the lower boundary of its short term uptrend and its 100 and
200 day moving averages. On the other
hand, it has been unable to rise above its February high.
Bottom line:
near term the direction of equity prices is in question, though that may
becoming questionable, as the Dow is now challenging its short term downtrend. As I noted last Thursday, the indices were
starting to get squeezed between their very short term downtrends and their 200
day moving averages. Yesterday’s Dow pin
action may be giving a preview of how this pattern will get resolved; though to
be clear, more upside follow through is needed before it is confirmed.
The price
movements in TLT, UUP and GLD of late have pointed at a weakening economy which
seems to be contrary to the stock Market narrative.
Fundamental
Headlines
Yesterday’s
economic stats were mixed at best: the April NY Fed manufacturing index and the
April housing market index were below estimates; February business inventories
were in line and equaled by sales; the headline March retail sales (primary
indicator) number was above expectations, though ex autos, they were in line
and ex autos and gasoline were below forecasts.
The
talking heads spent most of yesterday yakking about the aftermath of last
weekend’s attack on Syrian chemical facilities: debating whether the Syrian
government did or did not wage chemical warfare on its citizens, press releases
from all participating governments arguing the virtue of their positions/actions,
etc. etc. etc. My bottom line is that
Trump makes military war like he makes trade war---a lot of talk and a little
action. To be clear, I have never
understood why the US is wasting lives and treasure on this country; so the
less done, the better. Still those 100
Tomahawk missiles cost you and me something.
If it was more than a nickel, it was too much.
An
Arab fighting force: a solution that should have been in place years ago
(medium):
Bottom line: the
first quarter earnings season starts in earnest this week and expectations
remain high for upbeat results. As I have
already noted, this has not gone unnoticed by investors. While I think much of the good news is in
stock prices, I also don’t think that there will be a lot of ‘sell on the news’
action as long as there is no negative news from other sources.
The important
factors to me remain the performance of the economy (which is currently not
that great), the direction of inflation (which has shown few signs of getting
out of control, yet) and Fed policy (which is tightening). That combo, historically, has not been great
for stocks.
I continue to
like how my portfolios are structured---half equities, half cash.
Dividend
and stock buyback growth (medium):
News on Stocks in Our Portfolios
Revenue of $20.01B (+12.6% Y/Y) beats by $630M.
Economics
This Week’s Data
US
February
business inventories rose 0.6%, in line: sales were also up 0.6%.
The
April housing market index came in at 69 versus estimates of 70.
March
housing starts rose 1.8% versus expectations of up 2.2%; but the February
reading was revised up by 4.7%.
International
First
quarter Chinese GDP grew 6.8%, in line.
March
Chinese retail sales were up 10.1% versus forecasts of up 9.7%; industrial
production was up 6.0% versus projected +6.3%; fixed asset investment up 7.5%
versus consensus of up 7.7%.
March
German economic sentiment came in at 87.9 versus estimates of 88.0.
March
UK wages rose 2.8% versus expectations of +3.0%.
Other
Update
on big four economic indicators (medium):
Punk
loan demand (short):
Fact
check (short):
Normalizing
the Fed’s balance sheet (medium):
More
crazy pension news (medium):
An
example of the above (medium):
The
likely impact on the banks of the recent revisions in Dodd Frank (medium):
The
bullish and bearish case for oil (medium):
What
I am reading today
Thoughts
from Morgan Housel (medium):
Who is paying the taxes (medium):
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