The Morning Call
12/3/18
The
Market
Technical
The
S&P had a great week, closing the prior week’s gap up open, trading above
the upper boundary of a developing very short term downtrend (if it remains
there through the close today, that trend will be voided) and touched its 200
DMA on the close Friday. As you know, I have
put a lot of weight on the 200 DMA resistant level as an indicator of Market
direction. The Dow is in the midst of a
challenge of its 200 DMA; if it closes above that level today, it will revert
from resistance to support. Let’s see
what today brings.
The
price action in the long bond was mildly positive last week; and it continues
to build a base, suggesting that the worst is over for TLT. I am sure that the more dovish tone from
Powell speech/FOMC meeting contributed to the less negative outlook for long
rates. That said, technically speaking,
almost all indicators continue to point to higher rates. That list grew last week as the 100 DMA crossed
below the 200 DMA. Also remember that
just because short term rates are stabilizing that doesn’t mean the same holds
for long rates when liquidity is being removed from the financial system.
Investors
clearly believe that the dollar is going higher. Virtually every technical indicator points
up. Not exactly what I would expect if
interest rates are going down; though it may be reflecting the prospect of a positive
trade deal with China.
GLD
has built a three month base---which is something given its dismal April to
August performance. The other plus is
that it has held above its 100 DMA for three weeks though it had failed to do
so twice before. It is becoming less
ugly.
The
VIX declined last week as stocks rose.
However, as I noted several times, by historical standards, this decline
is very, very tame in the face of a 1300 point rise in the Dow. Note also that the 100 DMA is getting close
to pushing above the 200 DMA---a technically positive occurrence. This chart remains positive (negative for
stocks).
Fundamental
Headlines
The
second weight on the Market has now been dealt with as China and US agree to a
three month truce with both sides receiving a small victory. While anything is better than nothing, the
most important trade issue (theft of intellectual property) with
China wasn’t even mentioned in the communiques from either side. If Trump means what he says (and I know
that is a questionable assumption) and the Chinese play hard ball (which in my
opinion is not questionable), then investors should get prepared for more pain---this
morning’s tip toe through the tulips notwithstanding.
Others
opinion:
And.
Morgan
Stanley’s outlook for 2019.
News on Stocks in Our Portfolios
Economics
This Week’s Data
US
International
The
November EU manufacturing PMI came in at 51.8 versus estimates of 51.5; the UK’s
reading was 53.1 versus 51.6.
Other
Qatar
leaves OPEC.
Alberta
orders oil production cut.
Italy
folds on deficit target dispute.
What
I am reading today
The myth of steady
retirement spending.
Quote of the day.
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