The Morning Call
9/6/18
The
Market
Technical
The Averages
(DJIA 25974, S&P 2888) turned in a mixed day (Dow up, S&P down),
largely result of a selloff in the tech stocks---the S&P has a much higher
exposure to tech than the Dow. Volume rose. Breadth was mixed---not surprising on a
schizophrenic day in the indices. However,
the Averages remain strong technically; and my assumption is that they will
challenge the upper boundaries of their long term uptrends (29807, 3065).
https://www.ccmmarketmodel.com/short-takes/2018/9/4/this-never-happened-in-the-20002008-bear-markets
The VIX was
up. While it continues to trade in the
midrange of its short term trading range, it still closed above its 100 DMA (now
resistance; if it remains there through the close on Friday it will revert to
support). Despite this, it is really not
giving much directional information.
TLT was down
again, closing near the lower boundary of its long term uptrend (and the
current pennant formation) as well as below its 200 DMA (now support; if it
remains there through the close next Monday, it will revert to resistance). Clearly, a major challenge is now underway,
the success of which would represent a significant change in trend.
The dollar also
declined, but remains technically strong.
That is not likely to change as long as dollar funding problems continue
the emerging markets.
GLD was up 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. Yesterday’s split performance
notwithstanding, the equity crowd remains unconcerned. I expect a challenge of the upper boundaries
of the indices long term uptrends.
Yesterday
in the charts.
Fundamental
Headlines
Yesterday’s
economic data was basically mixed: weekly mortgage applications were down,
while purchase applications were up; the July trade deficit was a 0.01% off
consensus; and month to date retail chain store sales grew faster than in the
prior week.
Overseas,
the PMI numbers out of the EU were in line while China’s were a disappointment.
The
day was consumed by political news: Facebook and Twitter executives testifying
before one Senate committee, Supreme Court nominee Kavanaugh before another and
all of Washington chirping about Woodward’s new book on the Trump administration.
Meanwhile,
emerging markets continued to have currency stabilization problems.
Bottom
line: I don’t believe the data supports the case for a lift off for the US
economy. Rather I believe they portray
an economy that is working hard just to maintain any growth.
The
latest from Jeffrey Snider on corporate cap ex spending (medium):
The dollar
funding problems in the emerging markets appear to be growing. If left unchecked, they will eventually find
their way to the US.
Meanwhile,
equities remain overvalued but seem impervious to any bad news---which, in my
opinion, provides a great opportunity to take some money off the table.
Update on
valuation:
A
powerful article from Martin Wolf (medium and today’s must read):
The latest
reading of Goldman’s bull/bear market indicator (medium):
Short selling is
not for the faint of heart (medium):
***overnight,
North Korea pledges denuclearization (medium):
Subscriber Alert
The
stock price of WW Grainger (GWW-$355) has traded into its Sell Half Range. Accordingly, at the opening this morning, the
Dividend Growth Portfolio is Selling half of its current position.
News on Stocks in Our Portfolios
Donaldson (NYSE:DCI):
Q4 Non-GAAP EPS of $0.58 in-line; GAAP EPS of $0.78.
Revenue
of $724.7M (+9.8% Y/Y) misses by $1.79M.
Economics
This Week’s Data
US
Weekly
mortgage applications fell 0.1% while purchase applications advanced 1.0%.
The
July US trade deficit was $50.1 billion versus expectations of $50.2 billion.
Month
to date retail chain store sales grew faster than in the prior week.
The
August ADP private payroll report showed growth in jobs of 163,000 versus
forecasts of 182,000.
Weekly jobless claims
fell 10,000 versus projections of being unchanged.
Revised
Q2 productivity rose 2.9% versus consensus of +3.0%; unit labor costs were down
1.0%, in line.
International
The
August EU manufacturing PMI was 54.6, in line; the services PMI was 54.4, also
in line.
The
August Chinese Caixin services PMI was 51.5 versus estimates of 52.6.
July
German factory orders fell 0.9% versus an anticipated increase of 2.1%.
Other
Trump’s
freeze on federal wages (medium):
GOP hopes to
reform budget process with the new appropriations bill (medium and a must
read):
Light
vehicle sales on course to decline in 2018 (short):
The
bearish case for oil (medium):
What
I am reading today
Dreaming
of early retirement? (medium):
The risks of drinking alcohol
(medium):
Study shows campus diversity
officers don’t increase diversity (medium):
And speaking of diversity (short):
The magnitude of the US failure in
the Middle East (medium and a must read):
Concealed emotions (medium):
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