The Morning Call
10/19/18
The
Market
Technical
The Averages
(DJIA 25379, S&P 2768) were down big yesterday. Volume rose but breadth was mixed---a little
unusual. The Dow ended below its 100
DMA, negating Tuesday’s break (now resistance).
The S&P finished right on its 200 DMA---follow through.
The VIX was up
15 ¼ %, retaining its positive chart---meaning it is a negative for stocks.
The long bond
was down fractionally, remaining in short term and very short term downtrends
and below both moving averages. Still a
negative technical picture.
The dollar was
up another ½ % and continues to have a positive technical standing. It is again nearing its August high, a
challenge of which would be a plus. I
continue to believe that UUP will move higher as long as the dollar funding
problem persists.
GLD rose but
still finished below its 100 DMA (now resistance). Certainly not a sign that investors are
seeking a safety trade.
Bottom line: the bulls and bears are duking
it out around the S&P 200 DMA; so until it breaks either below its 200 DMA
or above its 100 DMA and the upper boundary of its very short term downtrend
(they are roughly the same level), it makes sense to assume that the
aforementioned battle will be waged between those two levels.
There are still
two positive seasonal factors at work (1) stocks have traditionally traded
higher in the months of November and December (2) this earnings season is off
to a very upbeat start; if that continues, it should provide additional
buoyancy to stock prices.
The long bond
and the dollar both continued to react to the hawkish Wednesday FOMC minutes. Gold remains in never, never land.
Thursday
in the charts.
Fundamental
Headlines
Yesterday’s
economic data was weighed to the upside: weekly jobless claims and the October
Philly Fed manufacturing index were better than expected while the September
leading economic indicators were in line.
Most of the economic
headlines were of the ‘below the fold’ type.
(1)
Chinese stock market plummeting [see yesterday’s
Morning Call],
(2)
rising uncertainty over the EU/Italy budget food fight.
EU officially slams Italian
budget.
Draghi adds his two cents worth.
(3)
the US pulling out of the Saudi investment conference.
Bottom line: the technicals are
going to tell us how seriously investors are concerned about the Fed
tightening, the softening in the global economy, the dollar funding problem,
the increase in non bank high risk leveraged loans and the economic/political
turmoil in China, Italy and now Saudi Arabia.
More on the shadow banking system
(must read):
It seems like a lot of fundamental
issues (to me) for the Market to absorb without, at least, some minor heartburn;
especially at today’s lofty valuations. But
maybe the indices dip to challenge their 200 DMA’s is the aforementioned ‘minor
heartburn’.
However positive the unwinding of
QE may be for the long term health of US capital markets, at some point, in my
opinion, it is still wholly or in part responsible
for all the above listed ills and will raise the pain level beyond a minor
heartburn. I just don’t know when.
As a result, I am glad that I own
cash; and I am glad that I have positions in the stocks of high quality companies
that are consistently growing their dividends at an above average pace.
The
benefits of a bear market.
The
latest from Leon Cooperman.
News on Stocks in Our Portfolios
Revenue of $4.72B (+15.1%
Y/Y) beats by $40M.
Revenue of $8.5B (+7.5% Y/Y) misses by $90M.
Revenue
of $3.91B (+15.3% Y/Y) beats by $40M.
V.F. Corp (NYSE:VFC) declares $0.51/share quarterly dividend, 10.9% increase from
prior dividend of $0.46.
Economics
This Week’s Data
US
The
September leading economic indicators rose 0.5%, in line.
International
Third
quarter Chinese GDP rose 1.6%, in line; retail sales were up 9.2% versus
expectations of up 9.1%; fixed asset investments were up 5.4% versus 5.3%;
industrial output +.5% versus +.53%.
Other
US
pulls out of Saudi investment conference.
More:
What
I am reading today
That was then, this is
now (on political discourse)
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