The Morning Call
9/12/18
The
Market
Technical
The Averages
(DJIA 25971, S&P 2887) rallied in unison yesterday on higher volume and an
improvement in breadth. They 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
6 ½ %, ending its 200 DMA (now resistance) and back below its 100 DMA only days
after it confirmed an upside break (now support; if it remains there through
the close on Thursday, it will revert to resistance). After making an attempt to trade into the
upper values of its short term trading range, it now appears to be heading for
the lower level of this range.
TLT was beaten
like a rented mule, closing below its 200 DMA (now resistance) and back below
its 100 DMA (now support; if it remains there through the close on Thursday, it
will revert to resistance), the lower boundary of its long term uptrend (if it
remains there through the close next Monday, it will reset to a trading range)
and, as a result, outside that pennant formation (making it the sixth such occurrence
this year Clearly, TLT is at a
potentially critical level. All I can do
is wait for follow through.
The dollar was up
fractionally, remaining technically strong.
That is not likely to change as long as dollar funding problems continue
in the emerging markets.
GLD was up fractionally but continues
to have the ugliest chart on the block.
Bottom line: the indices
traded back in harmony and 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 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
Yesterday’s
economic stats were not promising: month to date retail chain store sales growth
slowed from the prior week while July wholesale inventories jumped on flat
sales.
Aside
from the numbers, the two major investor concerns remain trade and the dollar funding
problems.
Yesterday
China appeared to be changing its strategy in the current standoff by sounding
reasonable. The question is whether this
is a sign that it may be crying uncle or just part of its positioning ahead of
the US elections (medium):
Concerns
are increasing that the dollar funding crisis will find its way to Europe
(medium):
Bottom
line: if the Chinese charm offensive is for real, the results would be a clear
plus for the economy.
It would also be a positive for the
dollar funding problem (stronger global growth will help). On the other hand, this problem is a direct
result of (the misallocation of assets) Fed policy and that still has to be
corrected (medium):
If not, with the
stocks discounting a rosy future, I believe the risk/reward tradeoff weighs
heavily on risk. Accordingly, I want to
own some cash when equities mean revert.
August
dividends by the numbers (short):
Today’s
look back at the current bull market (medium):
The
latest from Jeff Gundlach (medium):
News on Stocks in Our Portfolios
Economics
This Week’s Data
US
Month
to date retail chain store sales grew slightly slower than in the prior week.
July
wholesale inventories rose 0.6% but sales were flat.
Weekly mortgage
applications fell 1.8% while purchase applications were up 1.0%.
August
PPI came in at -0.1% versus expectations of +0.2%, ex food and energy, the
reading was also -0.1% versus +0.2%.
International
July
EU industrial production down 0.8% versus estimates of down 0.5%.
Other
CBO
estimates the budget deficit will hit $1 trillion this fiscal year (medium):
Is
Dr. Copper suggesting that there is trouble ahead? (short):
Update on
student loans (medium):
Iranian
sanctions and the price of oil (medium):
However,
OPEC warns of slowing demand (medium):
Leading
indicator for commercial real estate falters (short):
What
I am reading today
Three questions about the
political economy (medium):
Turning
nothing into something (medium):
The
problem for active managers isn’t indexing (medium):
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