The Morning Call
9/11/18
The
Market
Technical
The Averages
(DJIA 25857, S&P 2877) turned in a mixed day on lower volume and weak
breadth. However, the Averages remain
strong technically; and my assumption is that they will challenge the upper
boundaries of their long term uptrends (29807, 3065).
The VIX was down,
but remained above its 100 DMA (now support).
However, it ended back below its 200 DMA, negating Friday’s break. That returns the VIX to a neutral position
roughly in the middle of its short term trading range.
TLT recovered, remaining
below its 200 DMA for a second day (now support; if it remains there through
the close tomorrow, it will revert to resistance). However, it ended back above (1) its 100 DMA
[negating Friday’s break] and (2) the lower boundary of its long term uptrend [negating
Friday’s break and making it the fifth such occurrence in the last year] and back
within the steadily narrowing pennant formation marked by the upper boundary of
its short term downtrend and the lower boundary of its long term uptrend. Clearly, TLT is at a potentially critical
level. All I can do is wait for follow
through.
The dollar was
down fractionally, but remains technically strong. That is not likely to change as long as
dollar funding problems continue in the emerging markets.
GLD was down and continues
to have the ugliest chart on the block.
Bottom line: while last week’s
schizophrenic trading in the Averages continued yesterday, they remain strong
and I continue to believe that they will challenge the upper boundaries of
their long term uptrends.
The dollar will
likely remain strong until the dollar funding problems are resolved.
The bond crowd is
clearly vacillating over the long term direction of interest rates; and I have
no idea what it will decide. That said,
the successful challenge of TLT’s long term uptrend will be significant,
technically speaking. And if it occurs,
that will likely provide additional strength to the dollar and weakness in GLD.
Yesterday
in the charts:
Fundamental
Headlines
No
US economic data releases yesterday.
Overseas, the August Chinese trade surplus with the US, its PPI and CPI
were disappointing while second quarter Japanese GDP was very upbeat.
Tariffs
and currency problems in the emerging market remain foremost among investor
concerns, though yesterday’s pin action suggests that most of those worries are
already in the price of equities. In
addition, this week will mark the ten year anniversary of the beginning of the
2008/2009 bear market. So expect lots of
looking back. Here is yesterday’s
sample:
***overnight,
China asked the WTO for authority to impose trade sanction on the US.
Bottom line: the S&P
has quadrupled since its 2009 low; it is 69% above its my Valuation Model’s 2018
year end Fair Value and is only 6% from the upper boundary of its long term
uptrend. I find that math pretty compelling. There is simply too much price risk not to
own some cash when equities mean revert.
If
you own bonds or bond ETFs, you should read this article of liquidity in the
bond market. (medium):
News on Stocks in Our Portfolios
Economics
This Week’s Data
US
The August small business
confidence index was reported at 108.8 versus consensus of 108.1
International
Other
The
Fed is becoming less predictable (medium):
The
July Black Knight mortgage monitor (short):
Update
on US consumer credit (short):
Philly
Fed new orders versus prices paid (medium):
Ray Dalio on
understanding a debt crisis (medium):
What
I am reading today
Equal
weighting eliminates concentration risk (medium):
Crypto
wipeout deepens (medium):
The
money game and the human brain (medium):
White
House trying to schedule a second Trump/Un meeting (medium):
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