The Morning Call
10/29/19
The
Market
Technical
The Averages (27090,
3039) had another good day. As I noted
previously, the S&P reset its very short term uptrend (the Dow still hasn’t)
and pushed through its prior lower high (the Dow still hasn’t); further, it
ended the day above its all-time high (the Dow didn’t; if it finishes there at
the close today, the break will be confirmed).
Volume and breadth improved. The
VIX actually rallied 3 5/8 %, very unusual on a strong up day in stocks---bouncing
away from its 7/25 low as the S&P pushed above its 7/25 high.
The indices still ended
solidly above both MA’s and in uptrends across all timeframes. Plus, as I noted, the S&P closed above
its all-time high---which is clearly an added positive. On the other hand, there are some negatives
(1) the Dow is now out of sync with the S&P, (2) the VIX advanced on a
strong up day, (3) October 11th gap up opens need to be closed and
(4) the S&P gapped up on its open, creating a second gap that needs to be filled.
My assumption remains that momentum is
to the upside and that the Dow will challenge its all-time highs (27398) will
be challenged; but the aforementioned short term negatives may require some
backing and filling before achieving any sustained move to the upside.
Update on margin
debt.
TLT declined 1%,
ending below its 100 DMA (now support; if it remains there through the close on
Wednesday, it will revert to resistance).
While it finished above its 200 DMA and in uptrends across all time frames, it is clearly
threatening the loss of momentum.
The dollar was
down two cents, but that doesn’t negate the regaining of its upside push.
Gold was down 7/8 %,
reversing back below the upper boundary its pennant formation and voiding my conclusion
on Friday that it has made a short term bottom and its price is headed higher. It closed right at the tip of that pennant
formation; so, we should get some directional information today.
Monday
in the charts.
Fundamental
Headlines
The numbers
yesterday continued the trend of negative releases: the September Chicago Fed
national activity index, September wholesale inventories and the October Dallas
Fed manufacturing index were disappointing while the September trade deficit was
smaller than expected.
Overseas,
September EU loan growth and September Chinese industrial profits were below
estimates.
This week will be
an eventful one. Here are the major
headlines:
(1)
this will be the busiest week of this earnings
season. To date, it is coming in better
than expected,
(2)
a number of key economic datapoints will be
released including the payrolls number, Q3 GDP and the October PMI’s,
(3)
the FOMC meets today and tomorrow. Expectations are high for another 25 basis
point rate cut though opinion is divided on what happens next. The Market has likely priced in the cut; so,
if there is a surprise, it will because the [a] Fed cut rates by 50 basis
points or [b] it doesn’t cut rates at all.
More.
And still more.
https://www.zerohedge.com/markets/brace-market-tantrum-why-one-bank-expects-fed-disappoint-wednesday
***overnight,
Johnson wins Labor backing for a December election.
Bottom line: over
the weekend, we got good news on Brexit (EU delays deadline) and more happy
talk on US/China trade. Couple that with
a better than expected earnings season and almost assured rate cut and the only
fundamental negative is the economic dataflow.
So, it is not surprising that investors would be feeling jiggy. Offsetting that is that stocks are very
overvalued, i.e. lots of good news is already priced into many sectors of the
Market. I am using that strength to take
a portion of my profits in stocks that are overextended.
Here are some
interesting stats on how Markets perform before and during recessions.
The pain trade: JP
Morgan versus Morgan Stanley.
Shiller: I see
bubbles everywhere.
News on Stocks in Our Portfolios
Revenue of $5.77B (-2.9% Y/Y) misses by $100M.
Revenue of $4.45B (+14.1% Y/Y) beats by $40M.
Economics
This Week’s Data
US
Month
to date retail chain store sales were the same as the prior week.
The
August Case Shiller home price index was unchanged versus projections of +0.3%.
The
October Dallas Fed manufacturing index came in at -5.1 versus estimates of
+1.4.
International
September
UK consumer credit loans fell 14.5% versus forecasts of a 7.1% decline.
October
Japanese CPI was reported at 0.4% versus consensus of 0.5%; core CPI was 0.5%
versus 0.7%.
Other
China
voices support for blockchain.
The allure and
limits of monetized fiscal deficits.
Decades
of deficits have add instability to the economic environment.
What
I am reading today
Quote of the day.
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