The Morning Call
10/3/18
The
Market
Technical
The Averages
(DJIA 26773, S&P 2923) had a mixed day (Dow up, S&P down) on higher volume
but mixed breadth. They remain
technically very strong. My assumption is that they will challenge the
upper boundaries of their long term uptrends (29807, 3065).
The VIX was up,
again not exactly what is expected on a mixed day, and continues to trade in a confusing,
atypical non-inverse relationship with stocks.
However, at the moment, it is still at the lower end of its short term
trading range and that is something of a positive for equity prices.
The long bond was
up, but it remains below both MA’s, in a short term downtrend and has shown no
move to recover the lower boundary of its recently negated long term uptrend.
The dollar was up
on huge, continuing its march toward its August high. I continue to believe that UUP will move
higher as long as the dollar funding problem persists.
GLD was up 1 ¼ %
also on big volume, finishing in the upper level of a developing very short term
trading range.
Bottom line: the indices
remain technically strong. I continue to believe that they will challenge the
upper boundaries of their long term uptrends.
The pin action in the long bond, the
dollar and gold were back out of sync, except to the extent that they are all
safety trades, and all on big volume. I
still think that investors are re-gearing their economic/valuation models; I am
just not sure where they end up.
Tuesday
in the charts.
Fundamental
Headlines
Only
two datapoints released yesterday: month to date retail chain store sales growth
slowed from the prior week and September auto sales were disappointing---not
indicative of a smoking economy.
There
was lots of analysis out on the US/Mexico/Canada trade. I have tried to provide opinions from various
segments of the political/economic spectrum; the general conclusion is that
Trump caused a lot of heartburn for not much gain.
There
was also news on my two favorite subjects:
US
FY2018 budget deficit hit $1.27 trillion.
Powell gives
hawkish speech.
Bottom line: in
yesterday’s summary, I posed the question ‘how much?’ of an impact would the
US/Mexico/Canada trade agreement have on our economy. As suggested in the above articles, the
answer, at least at first blush, is ‘not much’.
That doesn’t
mean opinions won’t become more upbeat as implementation takes place or that
the agreement won’t lead to better deals with Japan, EU and China. But for now, it looks like the first trade
agreement won’t have much effect on the long term secular growth rate of the
country.
That said, on a
cyclical basis, having the uncertainty of a NAFTA trade war out of the way will
likely increase businesses certainty about making investment plans that were
delayed when this whole process started.
And that is a short term positive.
Not
to throw cold water on what seems to be a minor plus, the current state of the
US fiscal policy remains a negative and a drag on secular economic growth.
Update
on the Buffett valuation indicator.
News on Stocks in Our Portfolios
Revenue
of $862.8M (+8.8% Y/Y) beats by $12.4M.
Economics
This Week’s Data
US
Month
to date retail chain store sales grew less rapidly than in the prior week.
September
auto sales fell dramatically.
Weekly mortgage
applications were flat while purchase applications grew 0.1%.
The
September ADP private payroll report showed job gains of 230,000 versus
expectations of 179,000.
International
Other
August
median household income.
Ed
Yardini on the outlook for the Chinese economy.
What
modern monetary theory says and doesn’t say about Venezuela.
Turkish
inflation hits 15 year high.
Italy
folds to the EU.
What
I am reading today
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