The Morning Call
10/16/18
The
Market
Technical
After remaining
in plus territory for most of the day the Averages (DJIA 25250, S&P 2750) faded
near the close to end in down for the day.
Traders’ eyes are now on the S&P which retreated off its 200 day
moving average, restarting the clock (now support; if it remains there through
the close on Wednesday, it will revert to resistance). I previously noted that this MA has offered
major support for the last two years.
Reverting to resistance would be a significant occurrence to the technicians.
Volume declined and breadth was mixed.
The VIX fell 9 %,
a bit unusual for a down day in stocks, but it retains its positive chart.
The long bond was
unchanged. It remained in an
intermediate term downtrend, a long term trading range and below both
MA’s. Still a negative technical picture.
The dollar was down
fractionally, but continues to have a positive technical standing. Though failing to challenge its August high
is a bit of a negative. However, I
continue to believe that UUP will move higher as long as the dollar funding
problem persists.
GLD was back in
positive territory, finishing above the upper boundary of its short term
downtrend for a third day, resetting to a trading range. This is the first positive technical
development for gold in a long, long time.
Follow through.
Bottom line: the key technical issue
at the moment is how the S&P trades around its 200 DMA. A reversion to resistance would likely have a
big negative impact on the technical community’s outlook for the Market. To be clear, we are only in a challenge
phase. So it is too soon to toll the
funeral bells. But today’s and tomorrow’
pin action are more important than usual.
Taking a step back, it is important to view (Wednesday
and Thursday’s pin action) with some
perspective---that is, that (the Averages) are barely off their all-time highs.
So it is no time to get beared up.
Even though I have thought that stocks were overvalued for over the last
two years and that a selloff was due, it doesn’t mean that mean reversion has
started. On the other hand, every journey
starts with a single step.
GLD’s performance over the last three
trading days may be giving a hint as to how the challenge of the S&P’s 200
DMA will be resolved (negatively).
Monday
in the charts.
Fundamental
Headlines
Yesterday’s
economic data was mixed: August business inventories/sale were in line, September
retail were awful, the October NY Fed manufacturing index was above forecast.
The
big headline (at least for me) was the confirmation that the US budget deficit continues
to grow. See below.
Bottom
line: I won’t bother you with another ‘irresponsible fiscal policy’ harangue;
but I will repeat my thesis: with the national debt at its level viz a viz GDP, deficit spending is a drag on
economic growth because servicing it usurps monies that would other go to
investment/consumption. And our ruling
class is doing at exactly time in the economic cycle that the government should
be running a surplus.
News on Stocks in Our Portfolios
W.W. Grainger (NYSE:GWW):
Q3 Non-GAAP EPS of $4.19 beats by $0.24;
GAAP EPS of $1.82 misses by $2.10.
Revenue
of $2.83B (+7.2% Y/Y) misses by $10M.
Johnson & Johnson (NYSE:JNJ):
Q3 Non-GAAP EPS of $2.05 beats by $0.02;
GAAP EPS of $1.44 misses by $0.44.
Revenue
of $20.35B (+3.6% Y/Y) beats by $300M.
BlackRock (NYSE:BLK):
Q3 Non-GAAP EPS of $7.52 beats by $0.65; GAAP EPS of $7.54 beats by $0.71.
Revenue
of $3.58B (+2.0% Y/Y) misses by $60M.
Economics
This Week’s Data
US
August
business inventories rose 0.5%, in line; sales were also up 0.5%.
The US FY2018
budget was $779 billion up 17% from FY2017.
International
October
German investor sentiment came in at -24.7 versus estimates of -12.0.
The
Italian government agreed on budget with a deficit that is above EU guidelines.
Other
Money
for nothing and ……….
What
I am reading today
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