The Morning Call
10/30/19
The
Market
Technical
The Averages (27071,
3036) rested yesterday; but nothing changed will respect the pin action in each
index, i.e. the S&P is above its former all-time high and the Dow is still
out of sync with the S&P. Volume and
breadth were weaker. The VIX was up 5/8
%, but it is still below its 7/25 low (while the S&P remains above its 7/25
high).
The indices still ended
solidly above both MA’s and in uptrends across all timeframes. My assumption remains that momentum is to the
upside and that the Dow will challenge its all-time highs (27398). But there remain some negatives: (1) the Dow is now out of sync with the
S&P, (2) October 11th gap up opens need to be closed and (3) the
S&P created a second gap that needs to be filled.
TLT declined nine
cents, ending below its 100 DMA for a second day (now support; if it remains
there through the close today, 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 one cent, but that doesn’t negate the regaining of its upside push.
The
liquidity problem is easing but not for the right reasons.
Gold was down ¼ %,
ending below the lower boundary of that pennant formation. Any follow through
would point more downside.
Tuesday in the charts.
Fundamental
Headlines
Yesterday’s
economic stats were mixed but weighed to the negative: September pending home
sales were better than anticipated; month to date retail chain store sales were
unchanged; the August Case Shiller home price index, September existing home
sales and October consumer confidence were below estimates.
Overseas, September
UK consumer credit loans and October Japanese CPI were less than projections.
Two headlines
worth noting:
(1)
US trade officials are hedging on US/China trade pact.
In addition, the Chinese are not happy with Trump’s ban on Chinese 5G
equipment,
I believe still
that China has no incentive to make a deal before November 2020; unless Trump
folds.
(2)
the media wasted a lot of time hashing over the
actions/language that will come out of today’s FOMC meeting. I believe that the Fed’s primarily concern is
not inflation, not unemployment but the Market.
As long as that is so, monetary policy will remain accommodative.
The BOJ leads the way. It is now
starting to lend ETF shares to prevent a Market freeze up.
Bottom line: there
is still a lot of good news out there: a better than expected earnings season,
an easy Fed, Brexit out of the headline.
Plus, we are moving into the season the historically has been the most
positive on the calendar. On the other
hand, the economic numbers remain bad and now the odds of a US/China trade deal
maybe falling. That’s a lot for
investors to juggle and the Market pin action reflects that.
Still, as I noted
above, I think that stock prices are going higher. But I view this another opportunity to take a
portion of my profits in stocks that are overextended.
News on Stocks in Our Portfolios
Revenue of $3.86B (-10.0% Y/Y) misses by $60M.
Automatic Data Processing (NASDAQ:ADP):
Q1 Non-GAAP EPS of $1.34 beats by $0.01; GAAP EPS of $1.34 beats
by $0.04.
Revenue of $3.5B (+5.7% Y/Y) misses by $20M.
Economics
This Week’s Data
US
September
existing home sales fell 2.1% versus expectations of down 1.0%
September
pending home sales rose 1.5% versus estimates of up 0.9%.
October
consumer confidence came in at 125.9 versus consensus of 128.0
Weekly mortgage
applications rose 0.6% while purchase applications were up 2.3%.
The October ADP private
payroll report showed job gains of 125,000 versus projections of 120,000.
Advance
Q3 GDP growth reading was +1.9% versus forecasts of +1.6%; the price indicator
was +1.6 versus +1.9; the PCE price index was +1.5% versus +2.0% while the core
PCE was +2.2% versus +2.1%
International
September
Japanese retail sales grew 7.1% versus expectations of -0.2%. This surprising result is at least partially
due to consumer buying in advance of a sales tax hike.
September
German unemployment came in at 3.1%, in line.
October
EU business confidence was reported at -.19 versus estimates of -.24; consumer
confidence was -9.8 versus -8.9; economic sentiment was 100.8 versus 101.1;
industrial sentiment was -9.5 versus -8.9; services sentiment was 9.0 versus
9.3.
Other
What
I am reading today
Different kinds
of stupid
How long will $1 million last in
retirement?
Another good statistical study on
wealth inequality in the US.
Why investors are so prone to
speculate.
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for Survival’s website (http://investingforsurvival.com/home)
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