The Morning Call
10/16/19
The
Market
Technical
The Averages (27024,
2995) soared yesterday on improved volume and breadth. They ended solidly above
both MA’s and in uptrends across all timeframes. The VIX
was down another 7%, finishing at the low end of its historic trading range (a
potential negative). The other downbeat
sign is the October 11th gap up opens which need to be closed. Overall, this pin action confirms my assumption
that momentum remains to the upside and that the all-time highs (27398, 3027)
will be challenged.
Gold, the long
bond and the dollar were all down. Gold finished
under the lower boundary of its pennant formation; if it remains there through
the close today, the trend of lower highs will take over. Clearly not a plus; though remember that it
remains above both MA’s and in very short term and short term uptrends. TLT is developing a very short term downtrend
and is only 2 ¼ points above its 100 DMA.
Tuesday in the
charts.
Fundamental
Headlines
Two stats were
released yesterday: month to date retail chain store sales continue weak while
the October NY Fed manufacturing index was upbeat.
Estimating
recession risk.
Overseas, the
data was mixed. July UK employment,
August UK average earnings, August Japanese capacity utilization and September
Chinese CPI were below estimates; September Chinese loan growth and October EU
and German economic sentiment were above forecasts; August Japanese industrial
production was in line.
IMF cuts 2019-2020
global economic growth forecast.
https://www.zerohedge.com/economics/imf-forecasts-synchronized-global-slowdown-weakest-growth-lehman
Other Market
impacting headlines.
(1)
More opinions on the trade deal.
MarketWatch.
BofA.
The Hill.
***overnight,
China threatens retaliation if house passes bill supporting freedom in Hong
Kong.
(2)
a Brexit deal now seems possible.
(3)
an historic Midwest blizzard may cause huge crop losses. I haven’t seen any confirming data on this
potential problem. But we need to pay
attention to the news flow on the subject (must read).
(4)
update on NotQE.
***overnight, more dissent within ECB on QE.
Bottom line: investors are apparently optimistic about the
future prospects for trade (headlines notwithstanding), third quarter earnings
season which started Monday (yet to be determined), QE (which investors have
always believed would be there) and Brexit (which seems to be happening).
Given the
valuation studies that I continue to update in these pages, I believe that most
of these potential pluses are largely discounted in current prices. Of course, prices can go higher. The question is, by how much? And
that answer has be weighed against the downside represented by some
approximation of Fair Value.
For me, that is
not an attractive risk/reward equation.
So, I am focused on taking advantage of strength that drives the stock
price into its Sell Half Range. This strategy
is not undisciplined selling; but targeted selling of a portion of the holdings
of a successful investment. But that
said, this strategy has raised my cash position to near 50%. A level that helps me sleep well a night even
after a 300 up day in the Dow.
Wall Street
expectations and reality.
An interview with
Robert Shiller.
The social
benefits of short selling.
News on Stocks in Our Portfolios
Economics
This Week’s Data
US
The
October NY Fed manufacturing index came in at 4 versus expectations of 1.
Weekly mortgage
applications rose 0.5% while purchase applications fell 4.1%.
International
September
UK CPI came in at +0.1% versus estimates of +0.2%; core CPI was +0.2%, in line;
PPI was -0.8% versus +0.2%; core PPI was -0.1% versus +0.1%.
The
August EU trade surplus was E14.7 billion versus forecasts of E17.5 billion; September
EU CPI was +0.2%, in line.
Other
Update
on household net worth.
The
2018 Consumer Expenditure Survey (how we spent our money).
Housing
and recessions.
Helicopter
money as a policy option.
How
concerning is the Chinese ‘super economy’?
September
Chinese auto sales continue to fall.
China’s
capital out flows are increasing.
What
I am reading today
The US, the Taliban and
the Kurds (must read).
Capitalism is the worst, except for all
the others.
How a pro reads charts.
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