The Morning Call
11/7/18
The
Market
Technical
The Averages
(DJIA 25635, S&P 2755) continued their rally, slightly improving the
technical picture. The Dow ended above its
100 DMA (now resistance; if it remains there through the close on Thursday, it
will revert to support) and above its 200 DMA for a fourth day, reverting to
support.
However, the
S&P finished below both moving averages and above the lower boundary of its
short term uptrend.
Volume very low,
likely reflecting that investors chose to remain on the sidelines ahead of the
election; breadth improved.
The VIX was down
fractionally, again trading somewhat at odds with the Averages, suggesting
complacency. It finished above both MA’s
and in a short term uptrend.
The long bond
was down, ending within very short term and short term downtrends and below
both moving averages. Still a negative
technical picture, indicating higher interest rates. However, like equities,
volume was quite low.
The dollar was down
slightly, closing below its August high but still within a short term and a
very short term uptrends and above both moving averages. I continue to believe that UUP will move
higher as long as the dollar funding problem persists.
GLD was down ¼ %,
but remained above its 100 DMA. While
the pin action remains a bit confusing, it does seem to be trying to establish
a trading range slightly above the former August to October trading range.
Bottom line: I am continuing to focus
on the S&P which is trading between its 200 DMA (which has been a
significant level for the past two years) on the upside and the lower boundary of
its short term uptrend (which it challenged unsuccessfully last week) on the
downside. Whichever of those boundaries
gets successfully challenged should tell us a lot about future price direction. Keep in
mind that (1) we are now in a seasonal period of strong Market performance but
(2) last Wednesday’s gap open to the upside needs to be filled.
TLT’s and UUP’s
performances both continue to point to higher interest rates (a tighter Fed)
which is definitely not a plus for the Markets.
Fundamental
Headlines
Two
datapoints yesterday: month to date retail chain store sales improved while
September job opening were disappointing.
Two
other developments:
(1)
a Chinese official said that the Chinese were willing to negotiate on Trump’s
main trade complaints. I have frequently
opined that I think that the Chinese would not do anything on trade ahead of
the elections. So maybe the comment was
in intended to demonstrate that they are willing to help Trump,
(2) while at the
same time, they have the power to harm---North Korea starts with the threats
again.
Bottom line: yesterday,
all eyes were on the elections. We now
know the outcome: gridlock, which has always been a plus in my eyes, i.e. there
is no majority to pass legislation that screws with my life. In this particular case, it will hopefully
slow down the growth in the deficit/debt, which, as you know, is major beef
with me. To be sure, there won’t be any
decline but at least it could stop growing.
Here is Goldman’s
assessment.
The
Markets’ reaction (pre-open):
Now
comes the FOMC meeting and its policy statement tomorrow. Expectations are for nothing new. We will see.
The Fed’s
Goldilocks forecast.
An
interview with Howard Marks.
News on Stocks in Our Portfolios
Automatic Data Processing (NASDAQ:ADP) declares $0.79/share quarterly dividend, 14.5% increase from
prior dividend of $0.69.
Economics
This Week’s Data
US
Month
to date retail chain store sales grew faster than in the prior week.
September job
openings came in at 7.0 million versus expectations of 7.1 million.
Weekly
mortgage applications fell 4.0% while purchase applications dropped 5.0%.
International
September
German industrial production rose 0.2% versus estimates of -0.1%.
Other
This
article is on healthcare spending in the UK; however, there is one chart worth
your attention---healthcare spending as percentage of GDP for large developed
countries.
The
latest on Brexit.
Recession
risks remain low.
What
I am reading today
The
problem with boredom.
Reflections on
the lottery.
The
declining effectiveness of congress.
Quote of the day:
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