The Morning Call
9/26/19
The
Market
Technical
The Averages
(26970, 2984) were up yesterday, reversing Tuesday’s selloff---though volume
was lower and breadth improved only marginally.
However, the VIX got pounded (down 6 3/8%), closing back below both MA’s
(now resistance) and negating Tuesday’s upside break.
I
mentioned yesterday that the S&P was near enough to the 9/4 gap up open
that it could potentially close it. Even
though the S&P was down intraday, it was still unable to do so. The Dow has not even gotten close. So those gaps will continue to generate a
magnetic pull to the downside. That
said, the indices’ momentum remains up on a long term basis.
The
long bond and gold were hammered largely in reaction to a strong dollar. The bad news is that this pin action was a
significant reversal in their recovery.
The good news is that on a short term basis, they both have gap down
opens that need to be filled; and on a longer term basis, momentum remains to
the upside.
The
dollar’s strength seemed to be the result of more happy talk on trade from
Trump, the innocuous language in the Trump/Ukraine phone call and the
continuing liquidity problem in the overnight funds market.
More on the dollar
liquidity problem.
Still more.
Repo guru; we have a problem.
***overnight, it
got worse.
Wednesday in the
charts.
Fundamental
Headlines
US economic releases
yesterday were positive; weekly mortgage
and purchase applications were down but new home sales (primary indicator) were
very upbeat.
Nothing
overseas.
With all the
impeachment talk, what better way to lift investor spirits than another upbeat
statement about the likelihood of a US/China trade deal? How many times can he do this before everyone
stops listening? I don’t have a
clue. But, in my mind, nothing has occurred that changes the
odds of a (no) deal before November 2020.
US imposes
sanctions on Chinese tankers carrying Iranian oil.
Trump released the
transcript of his phone call with the Ukrainian president. As you might expect, the dem’s position is
that it supports their view that Trump’s comments were potentially an
impeachable offense while the GOP scoffs.
My take is that nothing is going to occur except political theater. The good news is that as long as this clown
show goes on, the less damage the political class can do to the taxpayers. The bad news is that it adds to the deep
divisions within the body politic and may prove a negative to investor
psychology.
Bottom line: my thesis
has been that stocks have reached historically high valuations primary driven
by irresponsibly accommodative monetary policy; and the mean reversion of those
valuations will likely be triggered by the loss of faith in the Fed. I certainly don’t know what will spark that collapse
in confidence. But I am paying close
attention to the current bank funding issues as a potential source.
I assume stock
prices will continue advance based on their technical strength. But I would use that strength to build protection
in my portfolio. I am not saying sell and
run for the hills. I am saying build a
cash position by selling a portion of holdings that have been big winners or
all of those that have been losers.
What the rise in
passive investing is doing to the markets.
Subscriber Alert
In my quarterly
review of Kimberly Clark (KMB), it failed to meet the minimum financial
requirements for inclusion in the High Yield Universe. Accordingly, it is being Removed and the High
Yield Portfolio’s position Sold.
News on Stocks in Our Portfolios
FactSet Research Systems (NYSE:FDS): Q4 Non-GAAP EPS of
$2.61 beats by $0.15; GAAP EPS of $2.34 beats
by $0.04.
Revenue of $364.28M (+5.3%
Y/Y) beats by $1.89M
Revenue of $11.06B (+5.3%
Y/Y) in-line.
Economics
This Week’s Data
US
Weekly
mortgage applications fell 10.1% while purchase applications were down 3.1%.
Weekly
jobless claims were up 3,000 versus projections of up 2,000.
August
new home sales rose 7.1% versus estimates of +3.5%.
The
August trade deficit was $72.8 billion versus expectations of $77.3 billion.
The
final Q2 GDP reading was +2.0%. in line with forecasts; the PCE price indicator
was up 2.6% versus 2.4%.
International
Other
ECB hawk resigns.
What
I am reading today
Fifty years of failed
climate change warnings.
The cumulative cost of auto
maintenance.
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for Survival’s website (http://investingforsurvival.com/home)
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