The Morning Call
1/29/20
The
Market
Technical
The Averages (28722,
3276) staged a comeback yesterday, especially the S&P. It finished right on the lower boundary of
its very short term uptrend (halting the clock on Monday’s break) and closed Monday’s
major gap down open. The Dow did neither;
leaving the indices out of sync and the near term pin action directionally in
question. They still ended above both
MA’s and in short, intermediate and long term uptrends. So, there has hardly been a loss in long term
momentum.
Counterpoint.
Volume was down,
breadth weak, moving out of overbought territory. The VIX fell 10 ¾%, but still finished for a third
day above both its 100 DMA (reverting to support) and its 200 DMA (now resistance;
if it remains there through the close today, it will revert to support).
The long bond fell
¾ %, but that didn’t impact the ongoing directional momentum change to the
upside. Although there are two gap up
opens below that need to be filled.
The dollar was unchanged,
remaining below both MA’s, in a short term downtrend and is still the ugliest
chart on the block. While it is attempting
to close that big gap down open from 12/23, my assumption remains that the
dollar will continue to weaken.
Gold declined 7/8%,
the first down day in almost two weeks.
It closed within very short term and short term uptrends and above both
MA’s.
Tuesday in the
charts.
Dr. Copper is
getting hammered.
Fundamental
Headlines
Yesterday’s
dataflow was upbeat. The January
Richmond Fed manufacturing index, January consumer confidence, month to date
retail chain store sales and the November Case Shiller home price index were
all positive. The only negative was
December durable goods orders/ex transportation (primary indicator).
The numbers
continue to come in ahead of forecast.
My take is that strength will help offset the economic fallout from the
coronavirus epidemic but not enough to provide any kind of ‘lift off’ to a higher
rate of economic growth.
In other news:
Update on
coronavirus.
The FOMC began its
January meeting yesterday; so, we will get the latest on rates and NotQE this afternoon. And what’s a day without a little Fed criticism?
Sometime, somewhere,
earnings are going to matter even though they haven’t for the last decade. The current earnings season is coming in line
with past history: mediocre reports on reduced estimates. This is the busiest week of this season and
it too has been mixed.
Bottom line: I opined
yesterday that as long as the NotQE continued that events like the coronavirus
epidemic, which likely won’t have dramatic long term negative implications for
the global economy, will probably not have that big an impact of the
Market. We will have the Fed’s last
thinking on rates and QE this afternoon.
I doubt any major changes policies or investor disregard for valuations.
More on valuation.
And more.
Thoughts on the
ETF industry.
Looking at returns
in the 2020’s.
News on Stocks in Our Portfolios
Revenue of $3.8B (-8.2% Y/Y) beats by $50M.
Revenue of $91.82B (+8.9% Y/Y) beats by $3.41B.
Revenue of $4.41B (+16.1% Y/Y) beats by $10M.
Revenue of $17.91B (-36.7% Y/Y) misses by $3.85B.
Automatic Data Processing (NASDAQ:ADP): Q2 Non-GAAP EPS of
$1.52 beats by $0.08; GAAP EPS of $1.50 beats
by $0.06.
Revenue of $3.67B (+5.2% Y/Y) misses by $20M.
Revenue of $10.77B (+3.8% Y/Y) beats by $130M.
Revenue of $5.35B (+3.7% Y/Y) beats by $50M.
Revenue of $46.82B (-2.4% Y/Y) misses by $140M.
T. Rowe Price (NASDAQ:TROW): Q4 Non-GAAP EPS of
$2.03 beats by $0.10; GAAP EPS of $2.24 beats
by $0.19.
Revenue of $1.47B (+12.2% Y/Y) beats by $20M.
Canadian National
Railway (NYSE:CNI)
declares CAD 0.575/share quarterly dividend, 7% increase from prior
dividend of CAD 0.5375.
Economics
This Week’s Data
US
Weekly
mortgage applications rose 7.2% while purchase applications were up 5.3%.
The
December trade deficit was $68.33 billion versus forecasts of $68.75 billion.
December
wholesale inventories fell 0.1% versus consensus of -0.2%; sales also declined.
International
January
Japanese consumer confidence came in at 39.1 versus expectations of 40.8.
February
German consumer confidence was reported at 9.9 versus estimates of 9.6.
Other
Global
growth without a trade cushion (must read):
It
is what you believe that ain’t so that matters.
CBO
projects $1 trillion deficit in FY2020 and expects it to grow every year
thereafter.
What
I am reading today
The
secret life of a professional hustler.
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