Tuesday, October 1, 2019

The Morning Call---The dollar liquidity problem persists

The Morning Call


The Market

The Averages (26916, 2976) were up yesterday on slightly higher volume and improved breadth.  The VIX was down 5 5/8% ending back below its 200 DMA (now resistance), negating Friday’s break but still above its 100 DMA (now resistance; if it remains above it through the close today, it will revert to support).  My directional assumptions remain that short term the 9/4 gap up opens need to be filled but longer term the momentum is to the upside.

            The long bond up another ¼ % continuing to recover from the 9/4 selloff.  However, gold resumed its losing way, getting whacked 1 ½%.  The dollar remains in a solid uptrend (up 3/8%).  Long term, all the charts remain solid; though short term, GLD appears to have further downside.

            Monday in the charts.

            How accurate is an inverted yield curve in predicting recession?

            Is it a bubble yet?



            Yesterday’s economic data was mixed: the September Chicago PMI was below estimates while the September Dallas Fed manufacturing index was above.

            Overseas, the numbers were also mixed: the September Chinese Caixin manufacturing and composite PMI’s, Q2 UK business investment and August EU unemployment were better than anticipated while August Japanese housing starts and construction orders, the September Chinese Caixin services PMI, August German retail sales, September German CPI were worse and Q2 UK GDP growth was in line.

           World Trade Organization lowers its global growth forecast.

            Aside from some chatter about yesterday being the end of the quarter (portfolio window dressing, earnings season starts soon), there were no major headlines.  However, there was some news on subjects that investors are monitoring:

            An interview with the NY Fed chief---who is responsible for handling the current dollar liquidity problem.

Dollar liquidity problems persist even though ‘end of quarter window dressing’ is behind us.

                Bank of Japan seems to be moving toward a tighter monetary policy.  The bond market doesn’t like it.

                Things you should know about the ‘whistleblower’.
            China doubles troop level in Hong Kong.

            ***overnight, a protestor was shot.  His condition not reported.
            Bottom line: the US stats continue to support my sluggish growth forecast while the international data remains weak, which, if it continues, could begin having an impact on our numbers.  Until that happens (see the above link on the predictability of the yield curve on a recession), Fed policy (easy money) will likely remain the dominant force in asset pricing, i.e. the upward bias of the Market will continue.  I will continue to use that strength to Sell Half of any stock that reaches that Range.
            The risk to the bullish trade war resolution scenario.

            Earnings season and the truth about Wall Street analysis.
    News on Stocks in Our Portfolios


   This Week’s Data


            The September Chicago PMI was 47.1 versus consensus of 50.2.

            The September Dallas Fed manufacturing index came in at 1.5 versus estimates of -2.3.

                Month to date retail chain store sales grew faster than in the prior week.


            August Japanese unemployment was 2.2% versus forecasts of 2.3%; its Q3 all industry capex was up 6.6% versus up 7.0%, the large manufacturers index was 5 versus 2, the small manufacturers index was -4 versus -6, the large nonmanufacturers index was 21 versus 20.

            September UK housing prices fell 0.2% versus expectations of +0.1%.

            The September German manufacturing PMI was 41.7 versus projections of 41.4.

            The September EU manufacturing PMI was 45.7 versus consensus of 56.6; core CPI was up 1%, in line.

             What EU membership costs the UK annually.

            Houthi’s annihilate three Saudi brigades.

            Saudi crude production restored to per-attack level.

What I am reading today

            Sweden makes it legal for jihadist to leave with the intent to commit violence and then return.  That can’t end well.

Visit Investing for Survival’s website (http://investingforsurvival.com/home) to learn more about our Investment Strategy, Prices Disciplines and Subscriber Service.

No comments:

Post a Comment