The Morning Call
10/14/19
The
Market
Technical
The S&P had a great day. It finished slightly above the downtrend of
higher highs. If it can hold that level
today, that very short downtrend will be voided; and my confidence level about
its upward momentum will be lifted. However,
(1) while volume was up, it was not by much and (2) it made a gap up open which
needs to be filled. Follow through.
The long bond took it in the
snoot on big volume. It has now made a
lower high and broken the solid recovery from the 9/4 selloff with authority. It would appear that the bond traders were
more impressed with the economic potential of the US/China deal than the stock
boys. And as you know, I usually defer
to former’s judgment.
The dollar also sold off sharply. But its chart is so much stronger than any of
the others shown here that it is far too early to anticipate a potential change
in direction.
GLD got popped on Friday. But note that it challenged the lower boundary
of that pennant formation and then closed above it. That is a plus, at least, for one day.
Not surprisingly, the VIX was down big. Not only did it void its very short term up
but it closed below both MA’s (if it remains there through the close on Tuesday
the 100 DMA will revert to resistance; if it remains there through the close on
Wednesday, the 200 DMA will revert to resistance). Clearly a plus for stocks.
Fundamental
Headlines
Last week’s
numbers from both here and abroad were negative. Score: in the last 208 weeks, sixty-seven
were positive, ninety-three negative and forty-eight neutral. So, no
reason to change the forecast, at least until we get a handle on what the
US/China trade deal/truce means. Here is a
summation of the agreement.
What happens from
here I think is still very much in question given the past efforts to get the
Chinese to commit to anything of substance regarding its industrial policy or
IP theft.
We do know that
the US imposition of the October tariffs has been delayed and that China has
promised to up its purchases of US ag products.
To be sure, those two steps if implemented will be a minor plus for the US
economy.
What we don’t know
is whether the Chinese will follow through with everything else. And given its history of interpreting an ‘agreement’
far differently than the US does, I think a dose of healthy skepticism is in
order that it will.
Still, for the
moment, we have to be thankful for what we got.
This is not yet a
reason to alter our economic forecast or equity valuations.
Fed continues to
ease monetary conditions.
News on Stocks in Our Portfolios
Economics
This Week’s Data
US
International
August EU industrial
production rose 0.4% versus expectations of +0.3%.
China’s
September trade surplus was $39.6 billion versus estimates of $33.3 billion;
September vehicle sales fell 5.2% versus -4.4%.
September German
PPI was -0.4% versus consensus of -0.6%.
Other
Latest
on Brexit.
What
I am reading today
Yet another example of
out education system gone haywire.
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