The Morning Call
9/5/18
The
Market
Technical
The Averages
(DJIA 25952, S&P 2896) took a modest respite from the current their robust
very short term uptrend. Volume fell. Breadth was weak---much more so than I expected.
The indices remain strong technically; and
my assumption is that they will challenge the upper boundaries of their long
term uptrends (29807, 3065)
Tops are a
process (medium):
September
tends to be the worst month for Market performance (short):
The VIX
continues to vacillate near the mid-point of its short term trading range but
below both moving averages. It is really
not giving much directional information.
TLT got hammered
on huge volume, closing near the lower boundary of its long term uptrend (and
the current pennant formation). However,
it does remain above both moving averages.
Given the strong performance of the dollar, it clearly lost its correlation
to UUP. At first blush, it appears to
have been a reaction to the strong ISM manufacturing stat (meaning the Fed will
continue to tighten) and the emerging markets pushing rates higher in an
(failed) attempt to stabilize their currencies.
I hope for more clarity.
The dollar was
up on significant volume, continuing its bounce off a higher low, above both moving
averages and in a short term uptrend. I
am assuming this is a result of the continuing dollar funding problems in
Turkey and Argentina that have now spread to India, Indonesia and South Africa.
GLD’s chart remains abysmal.
Bottom
line: dollar funding problems continued
to impact the dollar, though their effect faded, at least temporarily, on the
long bond. Of course, the equity crowd remains
unimpressed with any difficulties of any kind, in any place, at any time. I expect a challenge of the upper boundaries
of the indices long term uptrends.
Yesterday
in the charts.
https://www.zerohedge.com/news/2018-09-04/september-starts-swoon-after-quietest-august-over-50-years
Fundamental
Headlines
Yesterday’s
economic data was mixed: the August ISM manufacturing index was well above
consensus while July construction spending was significantly below; the August
manufacturing PMI was basically in line.
More diverse signals.
The
biggest economic headline was the continuing turmoil in the currency
markets. Bond investors may be over it
while equity investors apparently never really cared. However, this is a manifestation of the
unwinding of asset mispricing and misallocation and you know what I think that
means.
Spanish
bank exposure to Turkey’s to dollar funding problem (medium):
And
things aren’t all that great at Italian banks (medium):
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 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 seem impervious to any
bad news---which, in my opinion, provides a great opportunity to take some
money off the table.
Sales
growth versus earnings growth (medium and a must read):
The
latest from John Mauldin (medium and a must read):
Counterpoint
from Ed Yardini (short and a must read):
News on Stocks in Our Portfolios
Economics
This Week’s Data
US
July
construction spending rose 0.1% versus expectations of +0.4%.
The
August manufacturing PMI came in at 54.7 versus estimates of 54.5.
The
August ISM manufacturing index was reported at 61.3 versus forecasts of 57.7.
International
Other
Investment
boom or not (short):
What
I am reading today
Travel bloggers’ favorite
five secret travel destinations (medium):
Are you an investor or a speculator?
(medium):
The decision matrix (medium):
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