The Morning Call
5/24/19
The
Market
Technical
The Averages (25490,
2822) had volatile day, closing down but well off their intraday lows. Volume was up slightly but still low; breadth
was negative. However, there was only
marginal damage to what are otherwise strong charts (1) the Dow challenged both
MA’s, but regained its 100 DMA and closed only very slightly below its 200 DMA
[now support; if it remains there through the close next Tuesday, it will
revert to resistance]. The S&P finished
above both its DMA’s, (2) neither made a
lower low, (3) both had gap down opens which now need to be filled and (4) the
S&P’s 100 DMA has crossed above its 200 DMA---a technical plus.
As I noted in
yesterday’s Morning Call, I am watching whether the indices make a lower low
after having made a lower high---which they have not done At the moment, my assumption is that the
indices will challenge their all-time highs---but with lower conviction. If the indices follow through to the downside
and make a lower low, then it would negate that assumption and raise the odds
that a double top has been made---a technical minus.
The VIX spiked
14 ½ %, bouncing off the lower boundary of its very short term uptrend and
ending above its 100 DMA (now resistance; it if remains there through the close
next Monday, it will revert to support) and right on its 200 DMA (now
resistance). All exactly the opposite of
what I expected at the close on Wednesday.
The long bond was
up over 1%, finishing above both MA’s, in a very short term uptrend and at another
two year high. The next resistance level
is its all-time high.
The dollar started strong, trading within nine
cents of a ten year high but then backed off.
Technically speaking, it suggests the (1) the strong resistance of that
ten year high and (2) the magnetic draw of those two unfilled gap up opens
below current price levels.
GLD
was up ¾ %. Its chart remains
broken---its 100 DMA remains resistance; plus, it still hasn’t fulfilled the
downside objective set by that recent head and shoulders formation.
Bottom line: while
it looked intraday that the Averages were going to make a new lower low, they
didn’t. So, a challenge of their all-time
highs remains a possibility; but if they follow through to the downside and
make a new lower low, that will raise the prospect that a double top has been
made.
One day does not
a trend make, but yesterday’s pin action in UUP, TLT and GLD points to a weaker
economy.
Thursday
in the charts.
A
naysayer on technical analysis.
Oil
in for a bumpy ride.
Fundamental
Headlines
Yesterday’s
stats were pretty dismal: April new home sales,
the May flash manufacturing, services and composite PMI’s were below
estimates as was the May Kansas City Fed manufacturing index. The one upbeat number was weekly jobless
claims.
Overseas, the May
Japanese flash manufacturing PMI along with the May EU flash manufacturing,
services and composite PMI’s were less than forecast. Q1 German GDP grew in line.
The
only headlines were on trade---the Chinese said that a meeting next month
between Trump and Xi unlikely.
From
Thomas Friedman: China deserves Trump.
***overnight,
Microsoft cuts ties with Huawei
Chinese
threaten UK over anti-Huawei moves.
Bottom
line: I posed the question in yesterday’s Morning Call: when if ever will
investors start to discount that there will be no trade deal in the near future. Was yesterday’s pin action that it may be
happening now? This author thinks so.
If
so, my second question comes into play: ‘how
long will it take Trump and/or the Fed to react?’
`
I will continue to take
advantage of current lofty valuations to Sell Half of any stock in our
Portfolios that trades into its Sell Half Range.
News on Stocks in Our Portfolios
Revenue of $8.15B (+0.1
Y/Y) beats by $30M.
Revenue of $2.34B (+0.4%
Y/Y) misses by $30M.
Economics
This Week’s Data
US
April new home
sales fell 6.9% versus expectations of -2.8%.
The May flash
manufacturing PMI came in at 50.6 versus estimates of 52.5, the services PMI
was 50.9 versus 53.2 and the composite was 50.9 versus 52.
The May Kansas
City Fed manufacturing index was reported at 4 versus March’s reading of 10.
April durable
goods orders fell 2.1% versus consensus of -2.0%; ex transportation, they were
flat versus +0.2%.
International
The
March Japanese all industry activity index was -0.4% versus expectations of
-0.2%; the April year of year core inflation rate was +0.9%, in line.
April UK retail
sales were unchanged versus estimates of -0.3%.
Other
The
truth about negative interest rates.
Speaking
of which, and I wish that I weren’t, another great article on the misallocation
of assets resulting from Fed policy (must read):
May
steps down.
What
I am reading today
Global warming; it can do anything.
Trump
plans executive order to help lower health care costs.
One
simple rule in saving for retirement.
Quote of the day.
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for Survival’s website (http://investingforsurvival.com/home)
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