The Morning Call
10/2/18
The
Market
Technical
The Averages
(DJIA 26651, S&P 2924) were up on the day, though volume was down and breadth
mixed. They 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
another 1%, not an expected performance on big Market up day---a further indication
of the VIX trading in a confusing, atypical non-inverse relationship with
stocks. However, 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 declined
1% on huge volume, suggesting that last week’s rally was only a brief
interruption of a move to the downside.
The move was also in sync with the dollar and gold. The next support level is the lower boundary of
its intermediate term trading range---about a point and a half lower.
The dollar was up
on volume, resuming its march toward its August high. I continue to believe that UUP will move
higher as long as the dollar funding problem persists.
GLD was down fractionally,
finishing within a developing very short term trading range; but just
barely. It remains an ugly chart.
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 were back in sync, suggesting higher interest rates
and a continuing dollar funding problem.
Monday
in the charts.
Fundamental
Headlines
Yesterday’s
economic data was mixed: August construction spending was a disappointment, the
September ISM manufacturing index was basically flat and the September Markit
manufacturing PMI was better than anticipated.
Those all are important numbers, especially construction spending (a
primary indicator); and they also confirm my forecast that the economy is
growing but not accelerating on a secular basis.
Stephen Moore on
CBO economic forecasts.
Counterpoint.
The
latest McKinsey survey of corporate executives’ economic outlook.
IMF
is also not so sanguine.
The
big news of the day was US/Mexico/Canada trade agreement. You know that I have been an optimist on the
outcome of Trump’s reworking of the post WWII political/trade regime. This is another step. Here are the details of the trade deal.
Bottom
line: while we now know the terms of the re-worked trade agreements with Mexico
and Canada, we need to know the economic impact on the long term secular growth
rate of the economy before getting too jiggy.
To be clear, I am not questioning whether or not they will be positive;
they almost certainly will be. The
question is ‘how much?’.
Not
to throw cold water on what is almost surely a plus, the current state of the
US fiscal policy remains a negative and a drag on secular economic growth.
Update
on stock market valuation.
The
latest from John Mauldin.
The
risk of an ETF driven liquidity crash.
News on Stocks in Our Portfolios
Revenue
of $16.49B (+1.5% Y/Y) beats by $130M.
Economics
This Week’s Data
US
August
construction spending rose 0.1% versus expectations of +0.4%.
The
September Markit manufacturing PMI came in at 55.6 versus estimates of 54.5.
The
ISM manufacturing index was reported at 59.8 versus consensus of 59.9.
International
Other
China
clamping down even harder on adverse economic news.
Emerging
market economies are taking another hit as oil prices rise.
Italy
headed for a collision with the EU.
What
I am reading today
What
if stocks don’t crash?
Nine essential conditions to commit
massive fraud.
Different
kinds of smart.
Iran attempts to bomb dissidents in
Europe.
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