The Morning Call
9/28/18
The
Market
Technical
After a strong beginning,
the Averages (DJIA 26439, S&P 2914) sold off the rest of the day but still
ended on the plus side. Volume was down
and breadth mixed. It seemed to me that
the Ford/Kavanaugh hearing sucked most of the energy out of the Market. I know that I was watching it most of the day
as were most of the Market guys I talk to.
So the indices remain technically very strong. My
assumption is that they will challenge the upper boundaries of their long term
uptrends (29807, 3065).
The VIX was down
3 ¾ % on the day, remaining in (inverse) sync with stock prices. I have previously noted that the VIX had been
trading in a confusing, atypical non-inverse relationship with stocks. That may be coming to an end. At the moment, it is still at the lower end
of its short term trading range and that is something of a positive for equity
prices.
The long bond rallied
fractionally, closing slightly above the upper boundary of its very short term
downtrend. I remain somewhat confused
by this given that the dollar and gold seemed to interpret the Fed chairman
Powell’s statement following the FOMC meeting as somewhat hawkish. However, it may be acting as a safety trade
as emerging markets and Italy are causing some heart burn.
The dollar has up
¾ % on very strong volume and ended the day above the upper boundary of its
very short term downtrend, which, as I noted above, continues my confusion
regarding its performance viz a viz that of TLT. I have previously observed
that a number of confusing or technically negative price movements are now
taking place and that could be a sign that investors’ are re-jiggling their
economic/Market models. (must read):
GLD was down ¾ %
on also on very heavy volume, finishing outside of that two week trading range I
have previously mentioned. In other
words, it has negated the only thing in its chart that was the least bit
positive. Clearly, it was not acting as
a safety trade.
Bottom line: the indices
remain technically strong. I continue to believe that they will challenge the
upper boundaries of their long term uptrends.
The pin action in the long bond, the
dollar, the VIX and gold are all acting somewhat atypical. That doesn’t necessarily mean something
negative is occurring. It is just that a
change seems to be in the air; and I think we need to be alert to it.
Yesterday in the charts.
Fundamental
Headlines
Yesterday’s
economic data was mixed: August durable goods orders were very positive, weekly
jobless claims were flat, the final revised Q2 GDP, inflation and corporate
profit numbers were not as positive as the second revised stats and the August
trade deficit was not good at all.
A detailed look at the GDP stat.
As
I noted above, the Ford/Kavanaugh hearing had most of the Street riveted to the
TV yesterday. As I worked through the
day, I found a number of articles addressing one of my two current major beefs on
the economy---this one irresponsible fiscal policy:
Entitlements are
a huge problem and getting worse (this is long but a great discussion on the
budgetary issues the US faces):
Here is a shorter version
making the same point:
Why
the surging US national debt is a problem.
Bottom line: I
continue to believe that the federal deficit/debt and the willful blindness of
the Fed to its own ineffectiveness are the problems that investors have to
contend with. Both at a time of elevated
equity valuation. I will continue to
take money off the table when any stock trades into its Sell Half Range.
The
latest from Howard Marks.
***overnight,
the economic stability of the EU was drawn into question when the Italian
government approved a budget that included a deficit well larger than EU
guidelines. Nothing fundamentally
negative has happened yet though the Markets suffering.
News on Stocks in Our Portfolios
Economics
This Week’s Data
US
The
August pending home sales fell 1.8% versus expectations of being 0.
The
September Kansas City manufacturing index was reported in 13 versus the August
reading of 14.
August
personal income was up 0.3% versus estimates of up 0.4%; personal spending was
up 0.3%, in line: and the PCE price deflator rose 0.1% versus forecasts of
+0.2%.
International
Other
Positive
news for the consumer.
Odds
of a US recession.
What
I am reading today
Either way it goes, the
world is a worse place today.
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