The Morning Call
10/28/19
The
Market
Technical
Friday’s pin
action allowed the S&P to reset its very short term uptrend and overcame
the last lower high. However, it still
has another lower high to challenge before it can go after its all-time
high. That said, my assumption remains
that it will move to that high; and given the relative positive earnings and
news flow, a push to a higher all time high seems likely.
Counterpoint.
The long bond’s
rally was short and contained. It is now
back approaching its 100 DMA. The good
news is that remains above both MA’s and in uptrends across all time
frames. Still this strong chart is in
danger of losing momentum.
Problems in the
high yield loan market.
Subprime auto
loans are defaulting at the fastest rate since 2008.
The dollar continued
its rebound off the lower boundary of its short term uptrend and 100 DMA. It is reclaiming the title of the strongest
chart of those indices I follow.
Gold has broken
out of the pennant pattern to the upside.
Typically, this means a directional move up. It still has a series of lower highs to overcome
but with a little follow through, it should, at the least challenge its recent
high (146.82). What is a bit mystifying
to me is that it is breaking to the upside at the same time the long bond is
declining and the dollar rising---both of which are typically negative for the GLD
price.
On
Friday, the VIX broke below the lower boundary of a trading range, pushing
toward the 9/25 low (= 9/25 high in the S&P). So, it continues to mirror the S&P,
providing little informational value.
Fundamental
Headlines
***overnight, EU
approves Brexit extension.
An interview with
Jim Bianco (must read).
Subscriber Alert
In my quarterly review
of the financials of United Technologies (UTX),
Donaldson (DCI), Coca Cola (KO) and PepsiCo (PEP), they failed to meet
the minimum financial quality standards for inclusion in their respective
Universes. Accordingly, at the Market
open, the Dividend Growth Portfolio is Selling its position in UTX, KO and PEP,
the High Yield Portfolio is Selling its position in KO and the Aggressive Growth Portfolio is Selling
its position in DCI and PEP.
The stock price of
Kroger (KR) has traded into its Buy Value Range. Accordingly, the Dividend Growth Portfolio is
Buying a one half position in KR.
News on Stocks in Our Portfolios
Revenue of $3.48B (-3.6% Y/Y) misses by $70M.
Revenue of $44.58B (-2.5% Y/Y) misses by $490M.
LVMH (OTCPK:LVMHF)
confirms its interest in acquiring Tiffany (NYSE:TIF)
with an official statement.
"In light of recent market rumors, LVMH Group confirms
it has held preliminary discussions regarding a possible transaction with
Tiffany," notes the company. "There can be no assurance that these
discussions will result in any agreement," reads the statement.
LVMH's offer for Tiffany is believed to be at $120 per
share.
Shares of Tiffany (TIF)
are up 28.61% premarket to $126.90 to sail past the 52-week high of
$117.93. LVMH is up 0.33% in Paris trading.
Economics
This Week’s Data
US
The
September Chicago Fed national activity index came in at -0.45 versus forecasts
of -0.37.
The
September trade balance was -$70.4
billion versus consensus of -$76.2 billion.
September
wholesale inventories fell 0.3% versus expectations of +0.2%.
International
September
EU loan growth was up 3.4% versus estimates of +3.5%.
September
Chinese industrial profits fell 2.1% versus an anticipated decline of 1.2%.
Other
What
I am reading today
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