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The Morning Call---Free Money Still Rules

|Includes: Donaldson Company, Inc. (DCI), XOM

The Morning Call

1/31/20

The Market

Technical

The Averages (28859, 3283) bounced yesterday, but remained below the lower boundary of their very short term uptrends. The Dow voided that trend on Monday and the S&P yesterday. That resyncs the indices (voiding their very short term uptrends and closing Monday’s huge gap down open). However, 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.

On the other hand, really significant support doesn’t exist until the Averages reach their 100 DMA [27661/3098] and the lower boundaries of their short term uptrends [24696/3058].

Volume was rose, breadth improved. The VIX fell 5 ½%, but still finished above both DMA’s (now support). The recent reversions are reinforcing the loss of short term upside momentum in the indices’ pin action.

The long bond was up two cents, continuing its ongoing directional momentum change to the upside. Although there are two gap up opens below that need to be filled.

Just A Matter Of Time...

The dollar was down 3/8%. Intraday, it touched its 200 DMA (now resistance) but fell back, 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 was up one cent, closing within very short term and short term uptrends and above both MA’s.

TLT, GLD and UUP continue to trade like the economy is not near any kind of ‘lift off’. The Averages are leaning in that direction but are not quite there yet.

Thursday in the charts.

Stocks Panic-Bid, Bonds Dumped After WHO Doublespeak Over "Global Pandemic"

Fundamental

Headlines

Yesterday’s data was mixed. The initial Q4 GDP growth estimate was in line though all of the price indicators were below estimates. Weekly jobless claims fell less than anticipated.

GDP per capita

Q4 Real GDP Per Capita: 1.40% Versus the 2.08% Headline Real GDP

US recession probability track.

Political Calculations: 1 in 28 Chance of U.S. Recession Starting Between Jan-2020 and Jan-2021

The stats were slightly weighed to the upside overseas. December EU unemployment, January EU economic sentiment and industrial sentiment were better than expected while January EU business confidence and services sentiment were less and EU consumer confidence and January German CPI were in line.

Other headlines:

Powell paves the way for a change in monetary strategy.

https://www.bloomberg.com/news/articles/2020-01-29/powell-paves-way-for-possible-dovish-shift-in-inflation-strategy

WHO declares coronavirus ‘global pandemic’.

Watch Live: WHO Reveals Decision On Coronavirus 'Pandemic' Status

***overnight update on coronavirus.

100,000 Chinese "Under Observation" As Coronavirus Deaths Soar; State Dept Issues "Do Not Travel" To China" Advisory

Bottom line. It would appear that ‘global pandemic’, mediocre economic growth, falling price pressures or any other negative headline are no match for free money. The Market may be experiencing a minor case of the willies short term. But the driving force behind equity prices remains NotQE.

The ETF problem.

Pento: Trillion-Dollar Stocks & The Imminent ETF Disater

Subscriber Alert

In my regular quarterly review, Caterpillar failed to meet the minimum quality criteria for inclusion in the Dividend Growth and High Yield Universes. Accordingly, at the Market open, both Portfolios will Sell their positions in CAT.

News on Stocks in Our Portfolios

Exxon Mobil (NYSE:XOM): Q3 Non-GAAP EPS of $0.41 misses by $0.04; GAAP EPS of $1.33 beats by $0.79.

Revenue of $67.17B (+3.3% Y/Y) beats by $2.59B.

Donaldson (NYSE:DCI) declares $0.21/share quarterly dividend, in line with previous.

Economics

This Week’s Data

US

December personal income was up 0.2% versus estimates of up 0.3%; personal spending rose 0.3%, in line.

International

December Japanese YOY construction orders were up 21.4% versus forecasts of 02%; housing starts YoY were down 7.9% versus -11.5%; industrial production was up 1.3% versus +0.7%; the unemployment rate was 2.2% versus 2.3%; retail sales were up 0.2% versus -4.5%; January CPI was +0.6% versus +0.9%.

January UK consumer confidence was -9, in line.

The January Chinese manufacturing PMI was 50, in line; the nonmanufacturing index was 54.1 versus consensus of 53.3.

December German retail sales fell 3.3% versus expectations of -0.5%.

Q4 EU flash GDP growth was +0.1% versus projections of +0.2%; YoY CPI was 1.4%, in line; YoY core CPI was 1.1% versus 1.2%.

Other

Brexit is here; now things really get complicated.

Brexit Is Finally Happening, but the Complicated Part Is Just Beginning

Bloomberg’s consumer comfort index rises to highest level since Dot com bust.

This Won't End Well...

Did the US just concede defeat in the China tech war?

Did The U.S. Just Concede Defeat In China Tech War?

What I am reading today

How to load a dishwasher correctly.

Sorry, But You're Loading Your Dishwasher All Wrong

Nigel Farage bids farewell to the EU.

Nigel Farage Bids Farewell to the EU

When it is better to claim social security benefits early.

Three signs you're ready to claim Social Security benefits at 62

The single biggest cost cut you can make to increase savings.

The No. 1 thing people with fat savings accounts scrimp on that you likely don't

Sorry, but the so called ‘do gooder’ funds are not that attractive an investment.

Sorry, but Your ESG Funds Probably Suck - Pragmatic Capitalism

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Disclosure: I am/we are long dci, XOM.