The Morning Call
9/18/19
The
Market
Technical
The Averages (27110,
3005) basically marched in place yesterday, closing 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 thirteen
days ago still have to be closed.
The VIX was down 1 ½ %, ending below both MA’s (now resistance), 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 ½ and is now challenging 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 thirteen days ago still needs to be filled.
The
dollar declined ½% but remains above both MA’s and in short and long term
uptrends. However, investors seem
unphased by the growing global dollar shortage problem.
More.
And more.
The risk of a liquidity
driven event is increasing (must read):
GLD
was up 1/8 %, closing above both MA’s, in very short term and short term
uptrends and the minor support level that I have been watching since last
Friday. It still needs to fill the gap
down open from thirteen 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. I remain
concerned about gap opens, increased volatility and low liquidity in other
indices and individual stocks.
Tuesday in the
charts.
Fundamental
Headlines
Yesterday’s economic
releases were largely positive. While growth
in month to date retail sales slowed, August industrial production, capacity
utilization and the September housing index were better than anticipated.
Overseas, the
September EU and German economic sentiment indices were above expectations.
Two items that I focused on yesterday:
(1) the
economics of oil, given Sunday’s attack on the Saudi production facilities. Concern eased as oil prices plunge on reports that Saudi output
will normalize in two to three weeks.
That is a clear positive in that the disruption in global supply will be
temporary, IF nothing else occurs. I said
yesterday that I can’t believe that some sort of retaliation isn’t in the
offing. Likely, the current radio silence means that any
response will be measured. But we won’t
know until it happens.
Saudi’s say they have evidence that the
attacks originated in Iran.
(2)
the current FOMC meeting which will end today---at
which time we will get any policy moves [lower rates, more QE] and the
narrative justifying those moves. Current
consensus is that it will lower the Fed Funds rate by 25 basis points.
I have long argued that the irresponsibly accommodative central bank monetary
policy over the last decade has had a deleterious impact on economic growth. Now a study showing the negative effects on economic
growth of lower and lower interest rates.
Are you listening Jerome?
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.
Mean reversion
ahead.
Handling risk in the
late stages of a bull market.
Bill Gates on oil
companies/stocks.
The latest from
Jeff Gundlach.
News on Stocks in Our Portfolios
General Mills (NYSE:GIS):
Q1 Non-GAAP EPS of $0.79 beats by $0.02; GAAP EPS of $0.85 beats
by $0.08.
Revenue of $4B (-2.2% Y/Y) misses by $80M.
Economics
This Week’s Data
US
Growth
in month to date retail sales slowed last week.
August
industrial production rose 0.6% versus estimates of +0.2%; capacity utilization
was 77.9% versus 77.6%.
Update
on big four economic indicators.
The
September housing index came in at 68 versus forecasts of 66.
Weekly
mortgage applications fell 1.0% but purchase applications rose 6.4%.
August
housing starts were up 12.3% versus consensus of up 4.5%; building permits were
up 7.7% versus -3.0%.
International
The
August Japanese trade balance was -Y136.3 billion versus expectations of
-Y355.9 billion.
August
UK CPI was up 1.7% versus projections of +1.9%; core CPI was +1.5% versus
+1.8%; PPI was -0.8% versus -0.5%; core PPI was +2.0%, in line.
August
EU CPI was +1.0%, in line; core CPI was +0.9%, also in line. July construction
output rose 1.1% versus 1.0%.
Other
Bitcoin
is a hedge against fiscal irresponsibility.
EU’s
growing trade deficit with China.
Global
auto sales to decline 2-3% this year.
What
I am reading today
Irish teen invents
magnetic fluid trap that remove microplastics from water.
Happy Constitution Day.
When is enough enough?
A simple trick that will help you
invest better.
Almost everywhere, fewer children are
dying.
Russia will be the first country to
deploy hypersonic missiles on submarines.
Solidarity, the union that won
Poland.
There are no old brave people in finance.
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for Survival’s website (http://investingforsurvival.com/home)
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