The Morning Call
11/13/18
The
Market
Technical
The Averages
(DJIA 25387, S&P 2726) gave back some of the gains from the last two weeks.
The Dow ended back below its 100 DMA
(one trading day after its reversion to support; if it remains there through
the close on Wednesday, it will revert to resistance), closed the most recent
gap opens but above its 200 DMA (now support).
The S&P
finished below its 100 DMA for (now resistance), back below its 200 DMA,
negating last Thursday’s upside break (now resistance) and also closed the most
recent gap open.
I don’t think
that yesterday’s pin action is a negative sign that the positive seasonal and
calendar effects won’t exert their usual influence. Indeed, I have been pointing for the last
week that those two gap opens probably needed to be filled before the indices
could mount a challenge to their former highs or the upper boundaries of their
long term uptrend. If the thesis is correct then more downside is coming in
order to close the initial gap opens.
Volume actually
rose on the holiday trading; breadth was bad.
The VIX was up 16
%, but not as much as I expected on a 600 point down day in the Dow. It remains above both MA’s and within a short
term uptrend.
The bond market
was closed.
The dollar was
up 7/8 %, continuing its strong performance.
I remain of the opinion that UUP will move higher as long as the dollar
funding problem persists.
GLD fell ¾ %, ending
below its 100 DMA (now support; if it remains there through the close on Wednesday,
it will revert to resistance) and the lower boundary of the trading range is
was trying to build.
Bottom line: the bad news is that the
S&P was unable to successfully challenge its 200 DMA and still needs to
close its late October gap open. The
good news is that both of the Averages closed the most recent gap open and the
positive seasonal and calendar factors aren’t going away.
The positive
scenario is that the indices fall further and close the initial gap open, then
go on to challenge higher resistance levels. The negative scenario is that the
seasonal and calendar factors can’t offset the negatives being posed by an
irresponsible fiscal policy, a tightening Fed and overly generous stock valuations.
Fundamental
Headlines
No
economic releases yesterday.
And
not a lot of news. However, here are
articles on my three favorite subjects.
(1)
peak fiscal indiscipline.
And:
(2)
change in central bank balance sheets in the second
half.
(3)
new China anti IP theft policy. Trump should have doing this all along
instead of getting bogged down in a tariff dispute.
***overnight,
top US and Chinese trade officials will meet in anticipation of Xi/Trump talks
at G20 meeting.
Bottom
line: the economic/Market fundamentals are not improving and valuations are too
high (as calculated by my Valuation Model).
There is the possibility of an end of the year, Santa Claus, rally. If that takes place, I would use the
opportunity to build cash---if you haven’t already done so.
News on Stocks in Our Portfolios
Revenue of $26.3B (+5.1%
Y/Y) beats by $60M.
Economics
This Week’s Data
US
The
October small business optimism index was reported at 107.4 versus expectations
of 108.0.
International
Other
What
do falling oil prices mean?
Latest
on the Italy/EU standoff.
https://www.zerohedge.com/news/2018-11-13/beware-fireworks-italys-budget-resubmission-deadline-looms
Bank
of Japan’s total assets are now larger than the country’s GDP.
https://www.zerohedge.com/news/2018-11-12/first-time-ever-bank-japan-total-assets-surpass-japans-gdp
What
I am reading today
Why social security will
never run out of money.
The financial problems of
state pension funds.
The world’s healthiest people
don’t go to the gym.
Can you afford to retire?
North Korea expands
secret missile bases.
https://www.zerohedge.com/news/2018-11-12/north-korea-expands-secret-missile-bases-peace-talks-stall
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