The Morning Call
3/8/19
The
Market
Technical
The Averages
(DJIA 25473, S&P 2748) had their first rough day in a while. The S&P has clearly backed off 2800,
trading through a minor support level and ending right on its 200 DMA. Meanwhile, the Dow’s 100 DMA has crossed
below its 200 DMA---a technical negative.
So, it appears that follow through has been to the downside. However, the 200 DMA usually presents decent support/resistance;
hence, I will be watching how the S&P treats this level today as an
indicator of near term price movement.
Volume was up;
breadth was again weak.
The VIX was up 5
½ %, ending above its prior low, having created a double bottom (bad for
stocks). Further, it closed right on its
200 DMA, being almost in inverse unison with the S&P.
The long bond was
up ½ %, remaining above the support level at which it has now become a double
bottom. That leaves it in a trading
range bounded by the aforementioned support level and its recent (triple) top. Its 100 DMA has crossed above its 200 DMA, a
positive. Are the bond guys having
second thoughts about higher rates/stronger economy?
The dollar soared,
finishing above the upper boundary of the November to present trading range. However, it gapped opened and as I remind you
occasionally, those gaps are usually closed.
Other than that, this chart looks strong and suggests that investors
believe that the US economy will be stronger than the rest of the world.
GLD was down slightly,
closing above a second minor support level and above both MA’s.
Bottom line: the
S&P has now clearly faded 2800. That
is negative short term; for things to get worse, it has to successfully
challenge its MA’s. It is way too soon to
assume that yesterday’s pin action is anything other than a normal retreat off
a very overbought condition.
The price action in TLT, UUP and GLD remains
inconsistent.
Thursday
in the charts.
***overnight,
Chinese stocks plummet.
Fundamental
Headlines
Yesterday’s
data was mixed: weekly jobless claims were down less than anticipated, Q4
productivity was better than expected but unit labor costs were worse, January
consumer credit rose more than consensus.
Overseas, the Q4 EU GDP grew
0.2%, in line.
The major headline was Draghi/ECB’s
monetary policy easing---leaving interest rates unchanged, its current version
of QE intact and promising to initiate additional QE steps later this
year. Given Draghi’s historic dovishness
plus the fact that the Fed, the BOJ and the Bank of China have all become more
expansive, this outcome is not surprising.
I continue to believe that the liquidity injections from the central
banks will have little economic effect but will provide fuel for asset price
advances.
China trade remains a center stage:
(1)
China uneasy about trade deal.
(2)
Trump wants both a trade deal and stock rally. Can he get both?
(3)
Another not so positive take on Trump’s trade policies.
***overnight,
trade summit delayed.
Bottom
line: all the trade happy talk notwithstanding, its outcome is not clear at
all. Whatever Trump may think about the
value of any trade deal to investors, I believe that one that doesn’t properly
address China’s industrial policy and IP will do nothing for the secular growth
rate of the economy and could very well disappoint those investors that he is
so eager to please.
Central
banks are now in QE sync. The mispricing
and misallocation of assets will only get worse.
News on Stocks in Our Portfolios
Economics
This Week’s Data
US
January
consumer credit grew by $17.0 billion versus expectations of up $16.8 billion.
Credit card delinquencies
rising.
February nonfarm payrolls
advanced 20,000 versus projections of up 175,000.
January
housing starts were up 18.6% versus consensus of up 8.5%; building permits rose
1.4% versus forecasts of down 2.9%.
International
The
February Chinese trade surplus came in at $4.12 billion versus estimates of
$17.5 billion.
January Japanese
household spending rose 0.7% versus expectations of -0.1%; Q4 GDP was up 0.5%,
in line.
February
German manufacturing orders were down 2.6% versus projections of +0.5%; however,
the January number was revised up substantially.
Other
Household net
worth declined in Q4.
The horror story
of government spending (must read):
Are Trump’s
deregulation efforts as positive as is being portrayed?
Italy’s battle
with the EU back in the headlines.
What I am reading today
How the Model T drove hats out
of fashion.
The moral implications of
luck.
A look at confirmation bias.
The continuing resiliency of
America.
Double
your money.
Investors should be satisfiers
not maximizers.
What
happens after you win.
‘Artificial’ 2.1 earthquake
detected in North Korea.
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for Survival’s website (http://investingforsurvival.com/home)
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