The Morning Call
11/16/18
The
Market
Technical
The Averages
(DJIA 25289, S&P 2730) experienced another roller coaster day, this time
closing up. The Dow ended below its 100
DMA (now resistance) and above its 200 DMA (now support).
The S&P
finished below its 100 DMA (now resistance), below its 200 DMA, (now
resistance) nut bounced off the lower boundary of its short term uptrend.
As I noted
yesterday, the indices closing both gap opens removed a major resistance factor. With yesterday’s bounce, both charts began building
a reverse head and shoulders formation---the technical maxim being that this
pattern is a sign of higher prices. While
more follow through to the upside is needed to complete this pattern, all of
the recent pin action seems to be setting up for the seasonal Santa Claus
rally---‘seems to be’ being the operative phrase. The S&P has to advance almost 100 points
to complete this formation; so a challenge of its all-time high and/or the
upper boundary of its long term uptrend is by no means a lock at this point.
Volume rose;
breadth improved.
The VIX fell 6%,
but again that was a bit tame for a day in which the Dow had a 500+ point
intraday swing. It remains technically
strong: above both MA’s and within a short term uptrend.
The long bond was
down fractionally. It appears to be
trying to build a base very short term but still finished below both moving
averages and in a short term downtrend.
And:
The dollar was up
slightly, remaining technically strong.
I remain of the opinion that UUP will move higher as long as the dollar
funding problem persists.
GLD was up, but
not enough to challenge any resistance levels (the 100 DMA being the closest).
Bottom line: we got the upside follow
through that Wednesday’s pin action set up.
So now the chances of a year-end Santa Claus rally have gone up. A further price advance will push those odds up.
TLT
and UUP were again amazingly docile on a wild stock day; GLD was up a little
but not enough to improve an otherwise ugly chart.
Thursday
in the charts.
https://www.zerohedge.com/news/2018-11-15/stocks-swing-headline-chaos-cable-clobbered-credit-cracked
Fundamental
Headlines
Lots
of economic data released yesterday, basically mixed: on the plus side: September business inventories/sales,
October retail sales and the November NY Fed manufacturing index; on the
negative side: weekly jobless claims, October import/export prices and the November
Philly Fed manufacturing index.
Of
course, the most important number was the positive October retail sales report
because it is a primary indicator.
However, those rising import/export figures point to higher prices which
won’t be lost on the Fed.
There
was one datapoint from overseas: October UK retail sales were disappointing,
adding to the generally lousy trend in stats this week.
The
main headline of the day was a back and forth among US trade officials on whether
or not the US is lowering the pressure on the Chinese.
First,
there was a report attributed to trade chief Lighthizer that the US was delaying
the schedule for tariff implementation.
Followed by---who’s on
first?
It
may be just coincidence, but it seems like the only time the administration
releases positive trade news is when stocks are down.
Bottom line: if I
am correct, Trump is attempting to change the US/Chinese trade paradigm in
which China was brought into the modern world by overlooking its theft of US
intellectual property and being granted favorable trade terms. That battle to reverse that model hasn’t been
and probably will continue not be an easy one---whatever occurs at the G20
meeting.
Of course, Trump
can always relent and accept something less than he appears to be trying
achieve. Initially, it would be a plus
because it would remove current uncertainty.
But in the long run, it would be a negative. So like fixing fiscal policy (too much
deficit spending) and monetary policy (the mispricing and misallocation of
assets), ignoring the ultimate consequences of failed policy would be the easy
way out. If he settles for anything like
NAFTA 2.0, a lot of heartburn will have been for naught.
On the other
hand, the Chinese could fold like a cheap tent; though history suggests that
this is wishful thinking.
In the end, I don’t
see any painless resolution to this problem.
There is either a faux deal and the IP theft continues or this remains a
twelve round cage match.
Of course, I could
be dead wrong.
The
latest from Jeff Gundlach.
News on Stocks in Our Portfolios
Economics
This Week’s Data
US
September
business inventories rose 0.3%, in line; but sales were up 0.4%.
International
October
EU new car sales fell 7.4%.
Other
More
on student debt, the failed social experiment.
***overnight
in the Brexit melodrama
What
I am reading today
Trouble in crypto land.
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