The S&P has almost closed the 9/4 gap up open. One more modestly weak day and that will be eliminated as a downside pull; which would set the stage for an attack on its all-time high (3027) and the upper boundary of its long term uptrend (3217?) which is low but my charting service still hasn’t solved its problems so I don’t have a good reading). On the other hand, the Dow isn’t close to filling the 9/4 gap up open. Until that occurs it will act as an anchor to any general price advance.
The long bond has rebounded from the sharp 9/4 selloff; but it is not out of the woods. To do so, it needs to set a second higher lower (which it may be in the process of doing) and then a second higher high. This is a wait and see chart.
Of all the major indices that I follow, UUP’s chart is the most the most stable. It has no gap opens, no potential challenged to MA’s or trend lines. For obvious reasons, that circumstance usually occurs when the world wants dollars either because various countries’ industries need dollars for trade (good news) or their financial systems need dollars for liquidity/solvency reasons (bad news).
The latest on dollar funding shortage.
On a short term basis, GLD have been weak, though it remains above both MA’s and in very short term and short term uptrends. As you can see, there are two trendlines that will define its short term pin action---the declining boundary on the upside and the base it has been building since 9/6. One has to break.
The VIX spiked again on Friday, leaving it above both MA’s (now resistance; if it remains above its 100 DMA through the close on Tuesday, it will revert to support; if it remains above its 200 DMA though the close on Wednesday, it will revert to support). The VIX has pretty much traded in sync with the Averages of late. So, I don’t see this pin action as particularly telling. But it is clearly not suggesting that stocks have overdone it to the downside.
As last week progressed, my impression was that the economic data was going to be positive. Actually, out of 17 indicators, nine was positive and eight were negative. The primary indicators were mixed---one plus, one minus and one neutral. My call is neutral. To be clear; even if I ruled a positive, it would be so weak as to not really count. Score: in the last 206 weeks, sixty-seven were positive, ninety-one negative and forty-eight neutral. So, the pattern continues: A little bit of this (positive). A little bit of that (negative). My forecast for sluggish growth is unchanged.
Overseas, the numbers were overwhelmingly negative. I am not sure the US economy can grow with the rest of the world’s economic growth slowing.
The three major headlines last week were:
(1) lots of happy talk about trade which as you know I believe should be discounted heavily,
(2 ) the dem’s push toward impeaching Trump [again]. I have no idea how this turns out. But I do believe that if the dem’s are pushing for a vote to impeach, it won’t help investor psychology,
(3) continuing turmoil in the overnight repo market. There are varied opinions about this a either a signal that global liquidity is drying up or just a [sort of] normal situation about which there should be no concern. Certainly, to date the latter opinion is dominant in the investor class.
News on Stocks in Our Portfolios
This Week’s Data
The September Chinese Caixin manufacturing PMI was 49.5 versus estimates of 49.0; the services PMI was 53.8 versus 54.0 and the composite PMI was 50.4 versus 50.0
August Japanese housing starts fell 7.1% versus forecasts of -6.1%; construction orders were down 25.9% versus -2.0%.
August German retail sales were up 0.5% versus expectations of +0.6%; September CPI was 0.0% versus +0.1%.
Q2 UK GDP growth was -0.2%, in line; business investment was -0.4% versus -0.5%.
August EU unemployment was 7.4% versus projections of 7.5%.
Latest on Brexit.
A summary of Rouhani’s visit to the UN.
What I am reading today
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