The Morning Call
9/20/18
The
Market
Technical
The Averages
(DJIA 26405, S&P 2907) advanced yesterday but at markedly different rates
(Dow up .61%, S&P up .13%; plus the NASDAQ was down). Still volume was up and breadth finally had a
cleanly positive day. So they remain
strong technically; and my assumption is that they will challenge the upper
boundaries of their long term uptrends (29807, 3065).
The VIX fell another
8%, catching up to the pin action in the indices. In doing so, it is approaching the lower boundary
of its short term trading range and reversing the recent trend in low
volatility as stock prices rise.
The long bond was
down again on big volume, finishing below both moving averages and pretty much
confirming Monday’s break of the long term uptrend. While the lower boundary of its intermediate
term trading range is only a couple of points away, given the length the pennant
formation that was negated when TLT broke the lower boundary of its uptrend
more downside should be expected. To
that end, the new lower boundary of its new long term trading range is 16+
points lower. Finally, as I have noted
repeatedly, I think this a significant event; not just from a technical
standpoint, but the fundamental implications of noticeably higher interest
rates on almost all asset classes. It
would also be the second sign (the dollar funding problem being the first) of
the undoing of the mispricing and misallocation of assets.
The dollar was down
fractionally, but still ended above the second very short term higher low. So it continues to be technically strong. Its pin action is not likely to change as
long as dollar funding problems continue in the emerging markets.
***overnight,
the dollar is falling
GLD was up again (surprise,
surprise), but is still the ugliest chart on the block---though it does seem to
be trying to build a base.
Bottom line: the indices
remain technically strong. 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 pin action
in TLT remains my main focus. It appears
to have broken a twenty year plus long term uptrend which, as I noted above,
has potentially significant fundamental as well as technical implications---not
all of which are positive.
Yesterday in the
charts.
Fundamental
Headlines
Yesterday’s
economic stats were somewhat positive: weekly mortgage/purchase applications
and the second quarter trade deficit were better than expected while August
housing starts were up but building permits down.
The
morons in our ruling class held most of yesterday’s headlines. I don’t have the words to express just how
far I believe that our political process has descended into the toilet. Ultimately, we will all be hurt whichever
side of the political spectrum we are on.
Putting
the political process aside, there are two more easily quantifiable problems
created by our ruling class---which I have harped on endlessly are:
(1)
putting our heads in the sand about the national debt
is not a solution (medium):
(2)
central bankers have planted the seeds of the next
financial crisis (medium):
The
Fed and the yield curve (medium):
Bottom line: irrespective of whether the DOJ/FBI
emails/memos are redacted, what our president’s d**k looks like or how deep in
sewer our political class will go to advance their agenda, I believe that (1) fiscal
policy is digging the country into such a deep debt hole and (2) the Fed has so
crippled price discovery that sooner or later the securities’ markets will be
penalized.
***overnight, Turkey’s new
economic plan (medium):
***China
said that it is planning to cut the average tariff rates on many products its major trading partners.
News on Stocks in Our Portfolios
Economics
This Week’s Data
US
Weekly
jobless claims fell 3,000 versus expectations of a rise of 6,000.
The
September Philadelphia Fed manufacturing index came in at 22.9 versus estimates
of 19.6.
International
Other
Iranian
oil sanctions appear to be working (medium):
August architectural billings
rebound (short):
What
I am reading today
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