The Morning Call
10/29/18
The
Market
Technical
The
S&P once again closed below the lower boundary of its short term uptrend
(if it remains there through the close on Tuesday, it will reset to a trading
range). If that challenge is successful,
the next visible support level is 1806. As you can also see, it is below both moving
averages and in a very pronounced very short term downtrend.
The
long bond rallied on Friday on huge volume.
If it can push up through its February/May lows, it will establish a
very short term uptrend. That said, I
believe that this latest uptrend is a function of the bond’s role as a safety
trade. Ditto the dollar.
The
dollar fell, finishing back below its August high. While its chart remains generally positive
(above both MA’s and in a short term uptrend), it still needs to trade through
that August high to confirm a further uptrend.
Gold
is trying to find a bottom and regain some upside momentum. Since early October it has managed to do that
but only by the hair on its chinny, chin, chin.
Watch for further upside.
The
VIX was unchanged on Friday, a good sign for stocks when the indices are down
big. On the hand, its chart continues to show strength (above its 100 and 200
DMA’s and in a short uptrend) which is not a good sign. Adding confusion to the technical picture.
Fundamental
Headlines
Last week’s
economic data was neutral as were the primary indicators. Score: in the last 159 weeks, fifty-two were
positive, seventy-two negative and thirty-five neutral. However, the international stats were quite disappointing.
So nothing in my forecast changes: after a great second quarter, the economy is
falling back to its below average secular growth rate. On the other hand, it seems like investors,
at least for the moment, are starting to doubt the current narrative that everything
is awesome.
The
major headlines last week:
(1)
Trump proposed a 10% tax cut on middle income
earners. That was later modified by the
chair of the house tax writing committee to include ‘if the GOP wins both
houses in the November elections’. These
comments have politics written all over them; so I am not sure of the odds of a
tax cut. Further, if there is a cut, in
my opinion, it will act as an offset to the spending cuts that Trump instructed
his cabinet to make two weeks ago. In
short, the outlook for a rising deficit/debt remains in place and what that
means for economic growth [or not],
(2)
the latest Fed Beige Book was released and read as
expected; and the ECB met, leaving its plans unchanged for unwinding its
version of QE.
News
on Stocks in Our Portfolios
Economics
This Week’s Data
US
September
personal income rose 0.2% versus expectations of +0.4%; personal spending was
up 0.4%, in line.
International
Other
What
I am reading today
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