The Morning Call
10/30/18
The
Market
Technical
The pin action of
the Averages (DJIA 24442, S&P 2641) continues to be the main headline---yesterday
making an intraday swing of 900 Dow points and closing down solidly. The Dow ended below its 100 DMA (now
resistance) as well as its 200 DMA for a fourth day, reverting to resistance.
The S&P
finished below both moving averages and the lower boundary of its short term
uptrend for the second day; if it remains below this level through the close
today, it will reset to a trading range.
Volume declined
but remained elevated; and, as you might expect, breadth was lousy.
The VIX rose only
2 ¼ % which is unusual for a highly volatile day that ends down big. That suggests either complacency or the
conviction that stocks are near a bottom.
The long bond
was down, closing within a short term downtrend and below both moving averages. Still a negative technical picture.
The dollar was
up another ¼ %, finishing above its August high---a clear plus. I continue to believe that UUP will move
higher as long as the dollar funding problem persists.
GLD fell, but
still ended above its 100 DMA (now support).
It also closed below the lower boundary of a newly developed very short
term uptrend. So the technical picture
is improving but just barely.
Bottom line: the good news is that (1)
the VIX is not spiking, indicating the relatively low level fear, (2) the
S&P hasn’t negated its short term uptrend---yet. It still has today to recover, (3) this
downturn is relatively mild to date; certainly no reason to panic and (4) we
are upon the powerful positive seasonal pattern in November and December.
The bad news is
that (1) the Averages’ 200 DMA have reverted to resistance---which I have
continuing reminded you, have been a source of considerable technical support for
the last two years [I promise this is the last time], (2) if the S&P resets
its short term to a trading range, there is not a lot of visible support above
1806, and (3) the FANG stocks, which have been the Market leaders for the
entire recovery from 2009, are getting blasted; typically, when the Market
loses its leadership, there is considerably more downside.
The long bond
and dollar were back trading like interest rates are going higher while GLD wanders
aimlessly in the desert.
Monday
in the charts.
The
mother of all support levels.
Fundamental
Headlines
Yesterday’s
economic data was mixed: September personal income grew less than anticipated
while personal spending was in line, out pacing income. (While higher spending
might seem like a good thing, it can’t last for too long in the absence of
higher income without adverse consequences); the October Dallas Fed
manufacturing came in above estimates.
The
other item was not real news. Trump
ramped up tariff threats against China if the November meeting doesn’t go well---but
he was just repeating himself.
Bottom
line: The bad news is out there; but
there has been bad news out there for a long time. The difference this time is investor perception. If that is turning negative on a longer term
basis, then there could be a lot more downside because stocks are so richly
valued. And with the technicals
continuing to deteriorate, that appears to be happening.
I am happy with my cash.
Never
tempt the Market gods.
News on Stocks in Our Portfolios
Revenue
of $3.9B (+14.7% Y/Y) beats by $40M
Revenue
of $5.94B (+12.3% Y/Y) misses by $10M.
Revenue
of $8.2B (-9.5% Y/Y) beats by $20M.
Economics
This Week’s Data
US
The
October Dallas Fed manufacturing index came in at 29.4 versus expectations of
28.0.
International
Third
quarter EU GDP rose 0.2% versus estimates of up 0.4%.
Other
Is
the growth myth over?
More.
Update
on big four economic indicators.
Slump in capital
spending.
The US borrowed $1.3
trillion in FY 2018.
One
of my long time pet peeves has been the pharmaceutical companies selling drugs
to foreign countries cheaper than they do here.
Trump is now making an attempt to solve that problem.
Math
and the future of housing.
What
I am reading today
Three tips to avoid
running out of money in retirement.
80% of Americans face a retirement
crisis.
Visit Investing
for Survival’s website (http://investingforsurvival.com/home)
to learn more about our Investment Strategy, Prices Disciplines and Subscriber
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