The Morning Call
10/18/19
The
Market
Technical
The Averages (27025,
2997) experienced another relatively calm day, finishing up fractionally on flat
volume and mixed breadth. Still, they ended
solidly above both MA’s and in uptrends across all timeframes. The VIX
was up (slightly unusual for an up day in stocks) remaining above its 9/20 low. Two other somewhat worrisome details are (1) the
indices seem to be struggling to get back to their 9/20 highs much less their all-time
highs and (2) the October 11th gap up opens which need to be closed.
That said, my assumption remains that momentum
is to the upside and that the all-time highs (27398, 3027) will be challenged.
Gold was up,
ending above the lower boundary of its pennant formation, leaving that
technical pattern intact. TLT was down slightly,
remaining close to challenging its 100 DMA but finishing in uptrends across all
time frames.
The dollar was
down 3/8% and is threatening its upward momentum by approaching both its 100 DMA
and the lower boundary of its short term uptrend. This pin action doesn’t make any sense in the
midst of a dollar funding shortage (though traders tell me it is due to strong
pound and euro reacting to the increased odds of a negotiated Brexit)---which continues.
World dollar liquidity
is crashing.
Thursday in the
charts.
What rising
insider stock sales mean---or not.
Fundamental
Headlines
Yesterday’s data
did not make for good reading: September industrial production/capacity
utilization (primary indicator),
September housing starts (primary indicator) and the October Philly Fed
manufacturing index were below expectations while
weekly jobless claims and
September building permits were above.
‘Soft data’ continues
to weaken.
The latest Atlanta
Fed GDPNow forecast.
Overseas,
August EU construction output was less than anticipated; September retail sales
were in line though ex fuel they were above estimates.
Aside
from the numbers, the rest of the headlines were generally upbeat.
(1)
China put out a statement indicating that it wants a
deal.
(2)
while events are moving fast on Brexit and there are still hurdles, it appears that a
deal can be made.
(3)
US and Turkey appear to have a deal, hopefully halting
the violence in Syria and the political discord at home.
Bottom line: yesterday was a juxtaposition of news---lousy
economic numbers and other big news items providing positive headlines. And the
net impact was basically a wash. Which
means to me is that there is not much conviction among buyers or sellers. However, given current valuations, I think
that the upside from a blockbuster positive news event is less than the
downside from a negative one. With that
risk/reward equation, I am not running for the hills but I do want some cash
reserves. My sources of funds have been
the stocks of companies that have deteriorating fundamentals or that have traded
into their Sell Half Range.
NotQE---if it
quacks like a duck.
More on valuation.
News
on Stocks in Our Portfolios
Johnson &
Johnson (NYSE:JNJ) declares $0.95/share quarterly dividend,
in line with previous.
Revenue of $9.5B (+8.0% Y/Y) beats by $80M.
Genuine Parts (NYSE:GPC):
Q3 Non-GAAP EPS of $1.50 beats by $0.03; GAAP EPS of $1.56 beats
by $0.08.
Revenue of $5.02B (+6.4% Y/Y) misses by $10M.
Revenue of $8.54B (+0.5% Y/Y) beats by $40M.
Economics
This Week’s Data
US
September
industrial production fell 0.4% versus estimates of -0.1%; capacity utilization
was 77.5% versus 77.9%.
International
September
Japanese CPI came in at 0.0% versus forecasts of +0.3%; ex food and energy, it
was +0.5% versus +0.7%.
Q3
Chinese GDP was up 1.5%, in line; September YoY industrial production was up
5.8% versus 5.0%, capacity utilization was 76.4% versus 76.6% and retail sales
were +5.4%, in line.
Other
What
I am reading today
Einstein
and the bomb.
Cost
of renting versus owning.
The
NY Times looks at Sanders’ Medicare for all’ plan.
What
to do with the small increase in Social Security benefits in 2020.
McConnell says get ready for a
senate impeachment trial.
Your UN dollars at work.
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