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The Morning Call--S&P 2800, Resistance Or Support?

The Morning Call

3/27/19

The Market

Technical

The Averages (DJIA 25657, S&P 2818) moved higher yesterday, with the S&P closing right on the lower boundary of its very short term uptrend (negating Monday’s break) and above the critical 2800 (2811/2815) level. That suggests that this is now a support level, meaning stock prices are likely headed higher. I am a little wary because volume shrank and breadth picked only slightly. But barring a dramatic reversal today, I think that the S&P has confirmed the continuation of upward momentum.

The VIX declined 10%, an outsized move for a 140 point up day in the Dow; but it gives credence to the notion of higher equity prices.

The long bond was off fractionally, doing little damage to its strong uptrend. That said, last Friday’s gap open still needs to be closed.

https://www.advisorperspectives.com/commentaries/2019/03/26/the-flattening-yield-curve

Stellar Treasury auction.

https://www.zerohedge.com/news/2019-03-26/stellar-demand-2-year-paper-foreign-buyers-soar

But Goldman isn’t worried.

https://www.bloomberg.com/news/articles/2019-03-26/goldman-joins-chorus-downplaying-menace-of-inverted-yield-curve?srnd=premium

The dollar rose 3/8 %, ending back above the upper boundary of the November to present trading range, above both MA’s and in a short term uptrend.

GLD was down ½ %, but it still in a solid uptrend.

Bottom line: the S&P appears to have reset 2800 (2811/2815) as support. I want to see some follow through; but the odds favor a further advance.

https://www.zerohedge.com/news/2019-03-26/chasing-reality-what-if-china-trade-deal-dovish-fed-are-not-enough

TLT, GLD and UUP continue to point to lower interest rates/a weaker economy.

Tuesday in the charts.

https://www.zerohedge.com/news/2019-03-26/aapl-angst-horrible-housing-data-hammer-stocks-yield-curve-hits-new-lows

Fundamental

Headlines

Yesterday’s dataflow was negative: February housing starts (I miss reported this stat in Tuesday’s Morning Call) and building permits, the January Case Shiller home price index, the March Richmond Fed manufacturing index, March consumer confidence were disappointing while month to date retail chain store sales were a plus.

Bottom line: political headlines aside, the news that was pertinent to equities include (1) the above listed numbers which support the outlook for a weakening economy and (2) the continuing flattening of the yield curve [see the links under Bonds above]. At the moment, opinions on the latter have been split largely based on how closely their firm’s profitability is tied to stock prices. The stock guys are offering multiple reasons of why ‘this time is different’. Bond guys are saying ‘no way, Melvin’.

As you are all too aware, I have to date been bearish on monetary policy and its impact on the economy; and I have been wrong. The technicals are saying that I am going to stay wrong, at least in the near future.

https://global-macro-monitor.com/2019/03/25/permabulls-for-the-long-run/

News on Stocks in Our Portfolios

Economics

This Week’s Data

US

Month to date retail chain store sales grew faster than in the prior week.

The January Case Shiller home price index fell 0.2% versus estimates of down 0.1%.

https://www.advisorperspectives.com/dshort/updates/2019/03/26/s-p-case-shiller-home-price-index-lowest-gains-since-2015

The March Richmond Fed manufacturing index came in at 10 versus forecasts of 12.

The March consumer confidence index was reported at 124.1 versus expectations of 132.0.

https://www.advisorperspectives.com/dshort/updates/2019/03/26/consumer-confidence-declined-in-march

Weekly mortgage applications rose 8.9%, while purchase applications were up6.4%.

The January trade deficit was $51.1 billion versus projections of $57.0 billion.

International

January/February Chinese industrial profits dropped 14.3% (YoY) versus the November/December reading of + 10.3%

Other

Just say no to Stephen Moore.

http://gregmankiw.blogspot.com/2019/03/memo-to-senate-just-say-no.html

Turkey in currency crisis.

https://www.zerohedge.com/news/2019-03-27/turkey-verge-collapse-overnight-swaps-hit-700-cds-soar

And France.

https://www.zerohedge.com/news/2019-03-26/yellow-vests-torrent-hope-cannot-be-stopped-police-blocks

And the UK.

https://www.zerohedge.com/news/2019-03-26/only-7-britons-support-mays-handling-brexit

What I am reading today

How Rick Singer built a college entrance cheating machine.

https://www.nakedcapitalism.com/2019/03/profile-of-a-scam-how-rick-singer-built-a-college-entrance-cheating-machine.html

Quote of the day.

https://cafehayek.com/2019/03/bonus-quotation-of-the-day-284.html?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+CafeHayek+%28Cafe+Hayek%29

Socialism—the failed idea that never dies.

https://www.adamsmith.org/blog/socialism-the-failed-idea-that-never-dies

How much do you need to save to retire?

https://politicalcalculations.blogspot.com/2019/03/how-much-do-you-need-to-save-to-retire.html

How to deal with adversity.

https://fs.blog/2019/03/adversity/

Who was Confucius?

https://www.nationalgeographic.com/culture/people/reference/confucius/

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