Digital Bytes

The majority of reporting companies for the earnings season is over. I rate it as a mixed bag. I will go further to offer my view for the year based on a sample of reports by corporations, the volume of traded shares and price action on the charts.

Many corporations posted good earnings, and yet, they gave poor guidance like Northrop-Grumman. On the flip side some firms had a weak quarter, but gave a strong guidance like Hershey. Keep in mind that some of the earnings of companies that beat expectations was due to previously lowering their guidance. CEOs are trying to manipulate the market to keep their evaluations high. Nothing new here.

The main reason for my conclusions on the market, and thus, the economy is based on three factors. One, the potential trade war between the US and China. Their could be moments of peace, but a leopard cannot hide its spots. There is something within the Chinese culture that allows the people in their culture to make a buck off someone else. By this I mean the Chinese copy products and they use the perception of the buyer when offered a inexpensive price, to acquire. They pirate anything and everything. Bottom line: they will continue to steal technology and copy cat products. Maybe this is why the Japanese do not get along with the Chinese?
Two, the impact of on again, off again trade deals to sales will cause the market to be range bound. This will cause more seasonal employment. The economy will have periods of strength and weakness.
Finally, the benefits of the tax cuts will have a reverse effect on the market. When corporations report their earnings, they will always fall short on year-over-year due to the strong stimulus of the tax act. In addition, many states will increase their gasoline taxes and fees. The consumer will realize the dangers to the economy of on again, off again trade deals. Federal workers will look to unionize and society in general, will see the wisdom of saving for a rainy day. This will reinforce the concept of periods of strength and weakness. The days of a consumer society are ending.
Bottom line: I see a year of consolidation in the stock market with more volume to the downside. Gold will benefit as our record deficits and our ability to repay our debts along with rising costs of healthcare, social security, Medicare and our military will begin to dawn on everyone. The dollar should fall to .92 cents.

As stated above, I developed my conclusions based on the fundamental side of corporate reports. The charts indicate the market is range bound, however there is more strength on the down days than on the up days. Here is a sample of reports.

Warning: Citi Group, Nvidia, Dow Dupont, Apple, Whirlpool, Harley Davidson, ITW, 3M, AK Steel, and Verizon.

Upbeat Guidance: Visa, Royal Caribbean, Oshkosh, Honeywell, Charter, Boeing, Exxon, Chevron, Facebook, Amazon, Master Card, and American Express.

There are a few points within the above companies worth mentioning. Boeing had a $100 billion dollar quarter which is mind blowing. The two oil giants, XOM and CVX posted substantial gains in a quarter where oil lost 30% of its price. In addition, oil service companies had a poor quarter. They say that oil firms are cutting rig count. The reasons are many, but one is the logistics of getting oil or gas to a pipeline for delivery. They are attempting to supply as needed. In the past those ideas never seem to work which means oil price shocks will happen in 2019. Find a cheap oil stock and just wait.
Home sales will continue to struggle unless some new fad like small homes take root. There are three basic needs: food, water and shelter. All three are rising beyond the wages that Americans receive. This is a problem that will overflow into the streets.

Beat Goes On: The cost for a Super Bowl ad for a 30-second commercial rose to $5.25 million. Yowza! However, the beat hit a skip in the record as the US and Russia ended their nuclear treaty. This is not good news for the world and the keepers of the Doomsday Clock.