The Morning Call
9/11/19
The
Market
Technical
The Averages
(26909, 2979) had another relatively quiet day, closing above both MA’s and in
uptrends across all timeframes. Volume was up; and breadth improved. The only negative is that both of the
indices made gap up opens last Thursday---which will have to be closed.
The VIX fell ½ %, ending below its 200 DMA for a
fourth day, reverting to resistance.
However, it closed back below its 100 DMA (now support, if it remains
there the close on Thursday, it will revert to resistance) and the lower
boundary of its August 5th trading range (inversely related to the
August 5th trading range for the Averages); if it remains there
through the close today, it will void that trend.
The
long bond was down another 1 ¾ %, finishing above both MA’s and in uptrends
across all time frames. So, the chart
remains strong and the trend toward lower rates remains intact. It also has last Thursday’s gap down
open---which needs to be filled.
How
much bigger can the bond bubble get?
The
dollar rose three cents, ending above both MA’s and in short and long term
uptrends. In addition, it still has last Wednesday’s gap down open---which
needs to be closed.
GLD
was down another 7/8 %. Nonetheless, it
closed above both MA’s and in very short term and short term uptrends. There
is also last Thursday’s gap down open---which needs to be filled.
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
resolved their August 5th trading range to the upside, pointing to
the return of upward momentum. The next
resistance levels are their July all-time highs (27398, 3027).
Underneath what appears to be a
relatively quiet Market is major rotation out of growth stocks into value
stocks---which seems to be driven by a developing scenario that includes the
economy avoiding a recession, an easier Fed and a US/China trade deal. That change in investor psychology would also
account for the pin action in TLT, UUP and GLD.
I am not sure that is the case. From a technical standpoint, all those gap
opens last week may just be a sign that the pessimism (need for a safety trade)
had gotten over extended---certainly the pin action in TLT, UUP ad GLD couldn’t
keep advancing at the accelerated pace from early June indefinitely. At some point, consolidation had to
occur. The point being that the original
retreat to a safety trade may well be the correct fundamental call, it just got
overextended on a technical basis.
That said, the new investor
perspective could be right. It is too
early to know. We will get a good idea
of the correct outlook by the way the indices handle those gap opens, i.e. a
correction that just covers those gaps would point to higher prices (and the more
positive economic scenario); on the other, if the indices blow through them,
then the original need for a safety trade was the correct one.
Tuesday in the
charts.
Fundamental
Headlines
Three tertiary
indicators were released yesterday.
Unfortunately, they were all disappointing: the July job openings
(JOLTS) report, the August small business optimism index and month to date
retail chain store sales.
Overseas, August
Chinese CPI and PPI were higher than anticipated; August Japanese machine tool
orders plummeted; while the July UK unemployment rate and personal income were
better than expected.
The
ECB meets tomorrow, so the news flow will pick up.
Another argument
for the ECB doing nothing.
The ECB’ dilemma.
***overnight,
China extends olive branch.
Bottom line: it
was another slow day for news on trade, monetary and fiscal policies. Indeed, the most important thing to note was
the internal mechanics of the Markets (see above). Nothing changed.
News on Stocks in Our Portfolios
Economics
This Week’s Data
US
The July job
openings (JOLTS) report showed 7.217 million openings versus estimates of 7.311
million.
The
August small business optimism index came in at 103.1 versus forecasts of
104.0.
Weekly mortgage
applications rose 2% while purchase applications were up 5%.
August
PPI came in at +0.1% versus projections of 0.0%; core PPI was +0.3% versus
+0.2%,
International
August
Chinese vehicle sales fell 6.9% YoY versus consensus of -3.2%; outstanding loan
growth was 12.4%, in line.
Other
Nominal
trade losses from the tariff war.
The
latest on Brexit.
What
I am reading today
An argument for
government subsidized college education versus student loans.
How to make your retirement savings
recession proof.
The benefits of a progressive
consumption tax.
Prosperity breeds idiots.
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for Survival’s website (http://investingforsurvival.com/home)
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