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Morning Commentary

Assessing Rally Threats

By Charles Payne, CEO & Principal Analyst
1/22/2020 9:25 AM

Question of the Week

What are the Greatest Exogenous Risks to Market Rally?
Democrats Win Presidential Election
Federal Reserve Misstep
Trade War Misstep
Debt Event 
Miscellaneous like Coronavirus

The market faced its first tough session of the year and held up well.  The coronavirus news, while worrisome, probably didn’t cause many money managers to dump stocks or individual investors to get out of the market.  The reporting, however, is an example of the kind of excitable hyperbolic stuff you can expect to hear in 2020 on down days.  Because the Dow Jones Industrial Average is so high, a normal down means shedding 200 points, so anything less probably shouldn’t be reported as “hits” or “slammed.”

Words are important, so make sure your financial news sources aren’t trying to trigger panic when reporting in breathless tones. 

Sure, the virus could get worse, but for now, the notion it triggered massive selling is way over the top.  Boeing (BA) on the other hand continues to be an unmitigated disaster, but maybe there was a climatic move yesterday.  If the FAA greenlights the 737 Max before the end of July it will be framed as good news, although by now, you would have thought Boeing management would stay away from return dates and timetables.  

Yesterday’s news coupled with reports Boeing needs to raise $10.0 makes the theory of Warren Buffet making a bid even more plausible.  The stock tumbled through the heretofore key support of $320 trigging massive sell programs and forcing trading to be temporarily halted.   Maybe $320 will be key resistance now and the buy point for technicians.  

Board Market Breadth

NYSE

NASDAQ

Fear Gauge?

The Volatility 500 Index climbed more than six percent, but that isn’t the kind of fear one would associate with outright panic and fear.   The index has been drifting lower and lower since August.

What are the Greatest Exogenous Risks to Market Rally?  I handicap probability.

10%

 

Democrats Win Presidential Election

 

10%

 

Federal Reserve Misstep

 

5%

 

Trade War Misstep

 

3%

 

Debt Event 

 

3%

 

Miscellaneous like Coronavirus

 

0%

 

Slower US Economy

 

After the close initial reactions to earnings were largely positive.

Traded Higher

8.76 million users, +20% year to year and above consensus of 7.65% but guidance of 7.0 million well below Wall Street 7.82 million.

             Revenue $21.77 billion consensus $21.64 billion and earnings $4.71 consensus $4.69.

Revenue $7.43 billion consensus $7.32 billion and earnings $2.49 consensus $2.35.  Red flag provision for loan loss $1.82 billion +11% from year ago +31% from third quarter.

     Revenues coupled with lower fuel prices helped the company beat on revenue and earnings.

Portfolio Approach

No changes in the portfolio. We are spying the exits on some, but mostly to preserve profits, though not trying to panic or overreact. 

Today' Session

The markets are set to open higher. The coronavirus concern is somewhat at bay this morning after reports that China has been proactive about stopping its spread. Additionally, news that Apple is asking Taiwan Semi (TSM) to up its supply of chips due to strong iPhone demand is lifting AAPL’s stock.  This speak to the strength in the consumer.  Speaking of which, we will get existing home sales at 10 ET.

 


Comments
if the Dems can somehow take the impeachment thing in their direction (even partially in their direction) the market will definitely selloff....

jim raynor on 1/22/2020 1:24:06 PM
If Dem"s have control of the House,Senate and White House ----- I will sell everything (except gold &
food) and SHORT the MARKET.

John Cowger on 1/22/2020 2:37:51 PM
 

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