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The Morning Call--Still Watching S&P 2800

|Includes: Accenture plc (ACN), PAYX

The Morning Call

3/28/19

The Market

Technical

The Averages (DJIA 25625, S&P 2805) had a roller coaster day, with the S&P ending below the lower boundary of its very short term uptrend (if it finishes there through the close today, the trend will be negated) but still above the critical 2800 level (but below the 2811/2815 level). Clearly, this level holds a lot of gravity; given that it the S&P had tried and failed on four prior occasions, that is not surprising. As you know, I thought that we had lift off last Thursday, but the immediate reversal suggests that there continues to be a bull/bear battle at the 2800/2811/2815 level. So again, follow through (in either direction) remains is the only thing to hang a directional hat on.

The stock market often produces its strongest returns after yield curve inverts, notes top quant

As an aside, while my attention has been focused on the S&P, I should point out the that the Dow made a lower high last Tuesday and has been in decline ever since.

Volume declined and breadth was mixed.

The VIX rose 3 ¼ %, leaving it between a double bottom and its 200 DMA---offering little informational value.

The long bond spiked again on heavy volume, ending above both MA’s, a very short term uptrend and has now broken through all visible resistance level between its current price (126) and its all-time high (134). That said, last Friday’s gap open still needs to be closed.

Are bond yields heading for new lows? - MoneyWeek

And.

German Bond Yields Tumble Below Japan's, US Yield Curve Crash Continues

And.

Mystery Trader Bets Huge That Market Is Wrong On Fed Rate-Cuts

The dollar rose three cents, leaving it 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: I said yesterday that ‘S&P appears to have reset 2800 (2811/2815) as support’---turns out that ‘appears’ was the operative word. It may be about to reset; but as I also said yesterday ‘I want to see some follow through’. I see nothing to do but set on my hands until there is directional evidence.

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

Wednesday in the charts.

Banks, Big Tech, & Bond Yields Tumble As Fed-Cred Collapses

Fundamental

Headlines

Yesterday’s economic data was slightly positive: weekly mortgage and purchase applications were up, the Q4 trade deficit deteriorated though the January figure improved.

Overseas, the January/February Chinese YoY industrial profits declined dramatically.

Fed policy remains front and center along with what is happening with the yield curve (see TLT above). Thrown into the mix is now the growing controversy surrounding Trump’s new Fed nominee, Stephen Moore.

More on the Fed decision. This from supporter, sort of.

Fed Needs to Get With The Program

This one, not so much. A must read from Jeffrey Snider.

Same Planet, Very Different Worlds - What Lies Below The Fed's Capitulation

And Moore.

In Moore, Trump Trusts (Google: 'Sycophant')

And Moore.

https://ftalphaville.ft.com/2019/03/27/1553702201000/Shopping-for-deflation/

Bottom line: it seems like the major questions that I have been raising on monetary policy, the economy and the bond market are getting closer to being answered; how they get answered will likely determine equity price direction over the next year. I have been anticipating a showdown on these issues far sooner than has occurred. I await the resolution.

Reality Has Now Become "The Producers"

News on Stocks in Our Portfolios

Paychex (NASDAQ:PAYX): Q3 Non-GAAP EPS of $0.89 beats by $0.01; GAAP EPS of $0.90.

Revenue of $1.07B (+14.3% Y/Y) in-line.

Accenture (NYSE:ACN): Q2 GAAP EPS of $1.73 beats by $0.16.

Revenue of $10.45B (+5.4% Y/Y) beats by $150M.

Accenture (NYSE:ACN) declares $1.46 semi-annual dividend, in line with previous.

Economics

This Week’s Data

US

Weekly jobless claims fell 13,000 versus estimates of a 7,000 increase.

Q4 2018 GDP growth was +2.2% versus forecasts of +2.4%; the price deflator was +1.9% versus +1.8%; corporate profits were flat versus a 3.5% advance in Q3.

Q4 trade deficit was $134.4 billion versus expectations of $130.0 billion.

International

The Q3 EU business confidence index came in at .53 versus projections of .66; the industrial sentiment index was -1.7 versus -.9; the consumer confidence index was -7.2, in line; economic sentiment indicator was 105.5 versus 105.9.

Other

Median household income declined in February.

Political Calculations: Median Household Income in February 2019

***overnight, developments on Brexit.

Pound Tumbles As Leading Brexiteers Walk Back Support For Brexit Deal

Turkey’s problems continue,

On The Edge Of Collapse: Turkish Lira Plummets As Central Bank Burns Through A Third Of Its Reserves

What I am reading today

Nothing is safe.

Nothing is Safe - Of Dollars And Data

Quote of the day.

Quotation of the Day...

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Disclosure: I am/we are long payx, ACN.