The Morning Call
10/22/19
The
Market
Technical
The Averages (26877,
3006) posted gains yesterday but on lower volume (what’s new?) and mixed breadth.
The VIX was down 1 ¾%, but its pin
action still holds little informational value. The indices ended solidly above both MA’s and
in uptrends across all timeframes. Two
other somewhat worrisome details are (1) they still remain below their prior
lower high [though the S&P just barely] and (2) short term, the October 11th
gap up opens need to be closed. My assumption
remains that momentum is to the upside and that the all-time highs (27398,
3027) will be challenged; however, if the Averages can’t close above that prior
lower high, my conviction will weaken.
Gold was down ½%, ending
slightly below the boundary set by the 9/10 low but above the trend of rising higher
lows.
TLT was off ¾% and
is again approaching a challenge of its 100 DMA; but it finished in uptrends
across all time frames.
Morgan Stanley
sees major cracks in the leveraged credit market.
The dollar was up
fractionally, managing to close on its 100 DMA (posing a threat to the upside
momentum) but above the lower boundary of its short term uptrend. Since we now know the source of the recent
weakness in spite of a dollar shortage (BOJ shrinking its balance sheet), the
question is how long will this trend continue?
I don’t have the answer.
Monday in the
charts.
Fundamental
Headlines
No US economic
data releases yesterday.
Overseas,
the August Japanese all industry index and September German PPI were better
than anticipated while the September Japanese trade balance was terrible.
IMF forecasts
slower economic growth in China.
Global economic
seen in Japan and South Korea export slump.
Most of yesterday’s
news flow was focused on individual corporate earnings reports. However, there were headlines on macroeconomic
issues that have Market impacts:
(1)
China:
So far, China has bought zero soybeans from US.
If there is a trade deal, will the global economy
improve?
(2)
Brexit. This
situation is so fluid that last night’s news is outdated. Here is the morning brief.
(3)
Turkey/Syria/the Kurds.
Bottom line: the economy continues to struggle. But the Fed is back expanding its balance
sheet---whatever label you want to put on it.
While there have been some signs that the Fed/Market co-dependency may
be weakening, until there is stronger evidence that is occurring, I have to
assume that the linkage remains. Meaning
stock prices will continue to advance. However, given the current extremely generous
valuations, I think that it makes sense to build cash reserves by selling a
portion of any of my holdings when, as and if its price trades into its Sell
Half Range.
CEO confidence
plunges.
Avoid complexity
in limiting risk.
News on Stocks in Our Portfolios
Sherwin Williams (NYSE:SHW): Q3 Non-GAAP EPS of $6.65 beats by $0.15; GAAP EPS
of $6.16 misses by $0.05.
Revenue of $4.87B (+3.0% Y/Y) beats by $40M.
United Parcel Service (NYSE:UPS):
Q3 Non-GAAP EPS of $2.07 beats by $0.01; GAAP EPS of $2.01 misses
by $0.06.
Revenue of $18.32B (+5.0% Y/Y) misses by $30M.
Procter & Gamble (NYSE:PG):
Q1 Non-GAAP EPS of $1.37 beats by $0.13; GAAP EPS of $1.36 beats
by $0.12.
Revenue of $17.8B (+6.7% Y/Y) beats by $370M.
Revenue of $5.43B (+1.1% Y/Y) misses by $40M.
Economics
This Week’s Data
US
International
The
August Japanese all industry index came in at 0.0 versus estimates of -0.1%;
the September trade balance was -Y123 billion versus +Y54 billion.
September
German PPI was +0.1% versus forecasts of -0.1%.
October
UK industrial orders index was reported at -37 versus consensus of -28; Q4
business optimism index was -44 versus -38.
Other
What
I am reading today
Money
can buy some happiness; health buys more.
The
role of luck in determining wealth.
This could help your
retirement savings last longer.
https://www.usatoday.com/story/money/2019/10/19/emergency-fund-can-help-retirement-savings/40309571/
Quote of the day.
Visit Investing
for Survival’s website (http://investingforsurvival.com/home)
to learn more about our Investment Strategy, Prices Disciplines and Subscriber
Service.
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