The Morning Call
9/19/19
The
Market
Technical
The Averages (27147,
3006) experienced one of those roller coaster days but managed to close up fractionally. Volume was down (as usual) and breadth was
mixed. They finished above both MA’s and
in uptrends across all timeframes. So,
the assumption is that they will continue to move to the upside---the next
major level to be challenged being their all-time highs (27398, 3027). As a reminder, the gap up opens from fourteen
days ago still have to be closed.
The VIX was down 3 3/8 %, ending below both MA’s (now resistance) and remaining in
(reverse) sync with the Averages. I
continue to watch this indicator for any deviation from its (inverse) symmetry with
the Averages as a sign of a Market reversal.
The
long bond rose 3/8 % and seems to the breaking the downward trajectory of its
price trend since the recent sharp decline began. It remains above both MA’s
and in uptrends across all timeframes. So,
the long term trend in rates remains to the downside. And that gap down open fourteen days ago
still needs to be filled.
The
dollar was up 3/8%, finishing above both MA’s and in short and long term
uptrends. However, investors seem
unphased by the growing global dollar shortage problem.
GLD
fell 5/8%. While it closed above both
MA’s, in very short term and short term uptrends, it has fallen below the minor
support level that I have been watching since last Friday. That maybe pointing to another down leg in gold
prices. On the other hand, it still
needs to fill the gap down open from fourteen days ago.
Bottom line: long term, the Averages are in
uptrends across all timeframes; so, the assumption is that they will continue
to advance. Short term, they have
regained upward momentum.
The dollar has definitely regained its
upward momentum. TLT appears to have halted
its downward momentum and is attempting to rebound. The weakness in GLD hasn’t yet
dissipated.
I remain concerned about gap
opens, increased volatility and low liquidity in other indices and individual
stocks.
Wednesday in the charts.
Fundamental
Headlines
Yesterday’s
economic releases were quite positive for a second day in a row: weekly mortgage
applications fell but the more important purchase applications rose; plus, August
housing starts and building permits were very strong.
Beware of some recession
analytics.
Speaking of which,
a recent CFO survey show majority believe a recession will start in 2020.
Overseas, the August
Japanese trade balance was much better than expected; August UK CPI, core CPI
and PPI were below estimates while core PPI was in line; August EU CPI and core
were in line; and July construction
output rose more than anticipated.
As expected the FOMC
cuts its key rate by 25 basis points. As
usual, I am not quite sure what the real bottom line was. On the one hand, the narrative in its
statement on the economy was slightly more upbeat than the last. And somewhat surprisingly (1) there were three
dissents on the need for a rate cut and (2) that while seven members expect one
more cut in 2019, five did not. So, the tone
of the narrative turned somewhat more hawkish from the last FOMC statement.
On the other hand,
in the Q&A following the meeting and the release of the aforementioned
statement, Powell sounded more dovish basically saying that (1) the Fed is
cutting rates and will now await data to decide what to do next, i.e. if the
data suggests rate cuts, it will and (2) QE is in the wings.
Do insurance cuts
work?
The Fed’s confusion. While I agree with the author’s conclusion,
he gets there rather circuitously, suggesting among other things that the Fed’s
job is ‘to outguess the markets’. That
is not its job, it job is guide the economy (not the Markets) towards full
employment and low inflation.
The ECB’s
strategy.
***overnight, the
Banks of Japan, Switzerland and England left key rates unchanged.
In other news, Pompeo
arrived in Saudi Arabia and said that the attack on that country’s oil facilities
was an act of war by Iran.
Saudi’ unveil ‘evidence’
that Iran was the perpetrator of the attacks.
But no response to date.
Bottom line: as
you know, I believe that easy money, lower rates and QE (except QEI) have been
a burden on the economy. That is not apt
to change. So, the continuation of those
policies will only increase that burden---which is not a plus for the economy
or corporate profits.
On the other hand,
they have been great for the Markets.
While there have been some indications recently that the Market/Fed
codependency may be unraveling, that hasn’t happened yet. Until it does, it is irrelevant that easy
money/QE is bad for the economy.
Money pumping won’t make us richer.
News on Stocks in Our Portfolios
Microsoft's (NASDAQ:MSFT) board approves the buyback plan, which represents about 4% of the
company's current market value.
Microsoft (NASDAQ:MSFT) declares $0.51/share quarterly dividend, 11% increase from
prior dividend of $0.46.
Economics
This Week’s Data
US
Weekly
jobless claims rose 2,000 versus expectations of up 7,000.
The
Q2 trade deficit was $128.2 billion versus estimates of $127.8 billion.
The
September Philadelphia Fed manufacturing index came in at 12 versus forecasts
of 10.
International
The
July Japanese all industry activity index was +0.2 versus consensus of +0.5.
The
July EU trade surplus was E29.8 billion versus projections of E26.2 billion.
August
UK retail sales fell 0.2% versus expectations of 0.0%.
The
OECD lowered its 2019 global growth estimate to +2.9% versus the prior estimate
of 3.2%.
Other
California
mega ports volume is down.
August
architectural billings were down.
EU
official says risk of a ‘no deal’ Brexit are substantial.
What
I am reading today
Leaked
‘UFO’ tapes taken by Navy aircraft.
https://www.zerohedge.com/geopolitical/leaked-ufo-tapes-are-real-and-should-never-have-been-released
US
behind in the development of hypersonic weapons.
Thursday morning humor.
Building a new life is key to
retirement.
Five retirement blind spots.
Fifteen ways to know that you are
succeeding at retirement.
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for Survival’s website (http://investingforsurvival.com/home)
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