The Morning Call
10/31/18
The
Market
Technical
The Averages
(DJIA 24874, S&P 2682) staged a big rally yesterday. However, the Dow ended below its 100 DMA (now
resistance) as well as its 200 DMA (now resistance) and below the upper
boundary of its very short term downtrend.
The S&P
finished below both moving averages, the upper boundary of a very short term downtrend
and slightly below the lower boundary of its short term uptrend for the third
day. Ordinarily, I would reset the short
term trend to a trading range; however, given its fractional close below that
boundary, I am holding off the call for another trading day.
Volume advanced,
remaining elevated; breadth improved.
The VIX fell 5 ½
%, putting, roughly though not quite, back in (inverse) sync with stock prices
after two days of aberrant behavior. However, remember that in both of those days,
its performance had suggested either complacency or the conviction that stocks
are near a bottom. That may have
happened yesterday.
The long bond
was down ½ %, closing within a short term downtrend and below both moving averages. Still a negative technical picture.
The dollar was
up another ½ %, finishing above its August high and starting to build a very
short term uptrend. I continue to believe
that UUP will move higher as long as the dollar funding problem persists.
And:
GLD fell ½ %, voiding
the recently established very short term uptrend, closing just barely above its
100 DMA (now support) and continuing to fade its recent positive price
performance.
Bottom line: in recent comments, I have
opined that, despite the negative volatility, it was too soon to get
bearish. Today, despite a great day in
the Market, I think it too soon to believe that the worst is over.
The long bond
and dollar continue to trade like interest rates are going higher while GLD wanders
aimlessly in the desert.
Tuesday in the charts.
Fundamental
Headlines
Yesterday’s
economic releases were mixed: month to date retail chain store sales improved;
the August Case Shiller home price index was in line; and the revised September/October
consumer confidence index was a wash.
No
other meaningful developments.
Bottom line: the
Market itself is the news; and the key issue is investor perception. It seems to me to be shifting. A year ago, bad news was ignored and any dip
was bought. Now, it seems good news is
being ignored and the rips are being sold.
And the question is, how long will this change in sentiment last? I have no idea; but I am watching the Markets’
reaction to new developments and the technicals for the answer.
I am happy with my cash.
The
contracting P/E.
https://thereformedbroker.com/2018/10/30/chart-o-the-day-how-the-contracting-pe-multiple-stole-2018/
News on Stocks in Our Portfolios
Revenue
of $4.29B (+13.5% Y/Y) in-line.
Automatic Data Processing (NASDAQ:ADP):
Q1 Non-GAAP EPS of $1.20 beats by $0.09;
GAAP EPS of $1.15 beats by $0.05.
Revenue
of $3.32B (+7.8% Y/Y) beats by $40M.
Economics
This Week’s Data
US
Month
to date retail chain store sales grew faster than in the prior week.
The
August Case Shiller home price index rose 0.1%, in line.
October
consumer confidence came in at 137.9 versus forecasts of 136.3; the September
reading was revised from 138.4 to 135.3.
Weekly mortgage
applications fell 2.5% while purchase applications were off 2.0%.
The
October ADP private payroll report showed job gains of 227,000 versus consensus
of 178,000.
The
third quarter employment cost index rose 0.8% versus expectations of +0.7%.
International
The
October Chinese manufacturing PMI came in at 50.2 versus estimates of 50.6; the
nonmanufacturing was 53.9 versus forecasts of 54.6.
Third
quarter EU (preliminary) GDP was +0.2% versus projections of +0.4%.
The
BOJ met and (1) lowered its estimate of 2018 GDP growth and (2) left interest
rates and QE unchanged.
Other
Trump
tariffs backfiring.
Capex fears.
What
I am reading today
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