The Morning Call
9/7/18
The
Market
Technical
The Averages
(DJIA 25995, S&P 2878) turned in another mixed day (Dow up, S&P down), again
largely the result of a selloff in the tech stocks---the S&P has a much
higher exposure to tech than the Dow. Volume
fell. Breadth remained mixed---not
surprising on a schizophrenic day in the indices. However, the Averages are strong technically; and
my assumption is that they will challenge the upper boundaries of their long
term uptrends (29807, 3065).
The VIX was up
again, closing above its 100 DMA for a second day (now resistance; if it
remains there through the close today, it will revert to support) and right on
its 200 DMA---if it successfully challenges this level, we have to entertain
the idea that stocks may be going lower.
TLT rose on
volume, bouncing off the lower boundary of its long term uptrend (and the
current pennant formation) as well as its 200 DMA---negating Wednesday’s break. While it survived Wednesday’s challenge, it
remains within the ever narrowing pennant formation marked by the upper
boundary of its short term downtrend and the lower boundary of its long term
uptrend. Again, technically speaking, a
break either way would point to further gains in the direction of the break.
The dollar was
unchanged, but remains technically strong.
That is not likely to change as long as dollar funding problems continue
the emerging markets.
GLD was up again but that was
meaningless in an otherwise awful chart.
Bottom line: dollar funding problems will almost certainly continue
to impact the dollar and could affect the pin action in the long bond and
gold. That said, concerns appeared to
have lessened a bit yesterday. The
continuing split performance notwithstanding, the equity crowd remains unconcerned.
I expect a challenge of the upper
boundaries of the indices long term uptrends.
Fundamental
Headlines
Lots
of data released yesterday. They turned
out to be the main headline of the day; and by and large, they weren’t that
great. The August ADP private payroll
report showed fewer job increases than anticipated; that was slightly offset by
better than expected weekly jobless claims.
Second quarter productivity was below estimates, July factory orders
were below forecasts and the August services PMI disappointed. The only real bright spot was the August ISM nonmanufacturing
index.
Overseas,
July German factory orders were much lower than projections for the second month
in a row.
As
if Trump didn’t have enough on his plate, he is hinting at trade war with Japan
The dollar
funding problems are showing up in US corporate behavior (medium):
Counterpoint:
Bottom
line: the economic numbers just aren’t improving as much as Street hype would
have us believe. With dollar funding
problems continuing and equities near their highs, it is not a bad time to have
cash in your portfolio.
News on Stocks in Our Portfolios
Economics
This Week’s Data
US
The August
services PMI was 54.8 versus expectations of 55.2.
July factory
orders fell 0.8% versus estimates of -0.7%; plus the June reading was revised
lower.
The August ISM
nonmanufacturing index came in at 58.5 versus consensus of 56.8.
August nonfarm
payrolls rose 201,000 versus forecasts of 195,000; however, July was revised
down from 157,000 to 147,000; the unemployment rate rose from 3.8% to 3.9%.
International
Revised
Q2 EU GDP showed a 0.4% increase, in line.
Other
What
I am reading today
Jim Grant’s tem most important
lessons in finance (medium):
Germany’s mew emerging
foreign policy (medium):
S&P’s new credit
rating system for China---don’t forget all those AAA rate mortgage backed
securities and how that all worked out (medium):
Politics
in Iraq and the price of oil (medium):
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