Monday, December 3, 2018

Monday Morning Chartology

The Morning Call


The Market

            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).



            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:


            Morgan Stanley’s outlook for 2019.

    News on Stocks in Our Portfolios
            Donaldson (NYSE:DCI) declares $0.19/share quarterly dividend, in line with previous.


   This Week’s Data



            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.


            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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