The Morning Call
11/15/18
The
Market
Technical
Averages (DJIA
25080, S&P 2701) swung mightily through the day, closing to the
downside. The Dow ended below its 100
DMA for a third day (reverting to resistance), right on its 200 DMA (now support)
and, intraday, closed the initial gap open.
The S&P
finished below its 100 DMA (now resistance), below its 200 DMA, (now
resistance), right on the lower boundary of its short term uptrend and, like
the Dow, intraday, closed the initial gap open.
I have included the chart because it illustrates one those technical
maxims that actually performs exactly as the maxim indicates (many times they
don’t). You can see that the S&P declined
right to the point that the gap is closed and then bounced.
The first step
of my (technical) operating thesis has occurred, i.e. that the Averages will
close their initial gap opens in order to advance on their all-time highs and
the upper boundaries of their long term uptrends on the back of seasonal and
calendar effects. Now the latter has to
take place. I want to emphasize that filling
those gaps doesn’t mean that the indices will challenge their all-time highs
and long term uptrends. Indeed, prices
could keep right on falling. But it does
mean that if an advance is to happen, the downward pull of those gap opens has
been eliminated.
Volume rose;
breadth was poor again.
The VIX rose 6%,
which again seemed 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 rose
seven cents but still finished below both moving averages and in a short term downtrend.
The dollar was
down nine cents, but remains technically strong. I remain of the opinion that UUP will move
higher as long as the dollar funding problem persists.
GLD was up 7/8 %,
but still ended below its 100 DMA for a third day, reverting to resistance.
Bottom line: as unusual as this may
sound, technically speaking, yesterday was about as good as it could get on
wild roller coaster day that end down.
Both of the Averages closed the initial gap opens, removing them as a
source of negative pull on prices. Plus
they both closed right on important technical support levels without breaking
below---the Dow on its 200 DMA and the S&P on the lower boundary of its
short term uptrend. I want to repeat
that this doesn’t mean stock prices are headed higher, but it is a great
indication of the potential.
TLT
and UUP were amazingly docile on a wild stock day; GLD acted as a safety trade,
though not enough to improve an otherwise ugly chart.
Wednesday
in the charts.
Fundamental
Headlines
Yesterday’s
US datapoints were slightly negative: weekly mortgage and purchase applications
were down while October CPI was in line as was the ex food and energy reading.
Overseas,
the news was somewhat worse: third
quarter German flash GDP, third quarter Japanese GDP and October Chinese retail
sales were all disappointing, while October EU GDP and October Chinese
industrial production were in line and October EU industrial production and
Chinese fixed asset investments were better than expected. Even though there was upbeat numbers, this is
not what global growth looks like.
The China
numbers.
***overnight,
China delivered a letter to the US addressing trade issues. It apparently contained little new by way of
concessions; but then they aren’t going to give away the ranch before real
negotiations at the top begin.
The Japanese
numbers.
Other news:
(1)
more on declining oil prices.
Inventories build:
(2)
UK and EU reach an agreement on Brexit; but it requires
approval from multiple entities.
***overnight, chaos ensues.
(3)
plus Maxine Waters, soon to be chairperson of the house
financial services committee, promised that come January, the deregulation gig
for the banks is up. Investors seemed
spooked [financial stocks were down].
However, as you know, I am not a fan of the big banks and their history
of taking too much risk and getting bailed out by the taxpayers when those
risks become manifest. So I am not upset
with Ms. Waters stance.
***overnight,
Powell speaks, says that the economy is fine and QT (quantitative tightening)
will proceed.
Bottom
line: in my opinion, irresponsible
fiscal and monetary policies as well as the economic stats both here and abroad
are not being correctly reflected in the price of stocks. And as I said yesterday, sooner or later,
those all are either going to start impacting valuations or they are going to
change. I don’t want to be fully invested betting that the latter will occur;
so I want to own some cash in order to buy stocks cheaper if the former
happens.
The
latest from Doug Kass.
Behavioral
risk is the highest in the early period of an investment.
News on Stocks in Our Portfolios
Economics
This Week’s Data
US
Weekly
jobless claims rose 2,000 versus estimates of unchanged.
October
retail sales were up 0.8% versus expectations of up 0.5%; ex autos, they were
up 0.7% versus forecasts of up 0.5%.
October
import prices jumped 0.5% versus forecasts of +0.1%; exports prices advanced
0.4% versus consensus of 0.1%.
The
November Philadelphia Fed manufacturing index came in at 12.9 versus
projections of 20.0.
The
November NY Fed manufacturing index was reported at 23.3 versus estimates of
20.0
International
October
UK retail sales fell 0.5% versus expectations of up 0.2%.
Other
It
is not if but when.
Falling
oil prices impacting other markets.
What
I am reading today
Who
were the Mamluks?
The sex recession: this is an
excerpt; the whole article is long but for a baby boomer, I thought it really
interesting.
Another great moment in nanny
statism.
The
pros and cons on living frugally and saving a lot in your 20’s and 30’s.
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for Survival’s website (http://investingforsurvival.com/home)
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