The Morning Call
10/4/19
The
Market
Technical
The Averages
(26201, 2910) recovered a portion of Wednesday losses yesterday. But volume was down though breadth
improved. The VIX fell 7 % ending above
its 200 DMA for a third day (now resistance; if it remains there through the
close today, it will revert to support) and above its 100 DMA (now
support).
The good news is
that (1) the indices made gap down opens on Wednesday and those need to be
closed and (2) the Dow fell to its 200 DMA intraday and bounced. The bad news is that both Averages closed
below their 100 DMA’s for a second day (both support; if they remain there
through the close today, they will revert to resistance).
My assumption for
the long term remains that the momentum is to the upside. However, if the Averages successfully
challenge both MA’s or if they close Wednesday’s down gap open but fail to make
a new high, I will have to start questioning that assumption.
The
long bond was up another 1%, maintaining the strong recovery from the 9/4
selloff. GLD continued to bounce back
above the lower boundary of the pennant formation shown in the chart on Monday
(up ½ %); though intraday, it touched the upper boundary of that formation and
retreated. The dollar was off one cent
but remains in a solid uptrend.
QE by any other
name.
Thursday in the
charts.
Fundamental
Headlines
Yesterday’s
stats were weighed to the negative: weekly jobless claims, the September NY Fed
ISM index and the September ISM nonmanufacturing index were below estimates
while August factory orders/ex transportation and the September Markit services
and composite PMI’s were in line.
Overseas, August
EU retail sales were in line; its August PPI, September services and composite PMI’s
were below expectations; as were September German services and composite PMI’s. The September Japanese services and composite
PMI’s were in line.
Trade wars
continue to threaten economic growth.
Bottom line: the economic data continues to command the
headlines. Unfortunately, they don’t
read well. There is, of course, a
perversity to this. The worst the stats
get, the higher the odds of an easier Fed which, as we all know, has to date
been the key driver of stock prices.
That seems to have figured in yesterday’s pin action. As long as the investors believe that Fed
liquidity will pump up asset prices, bad news is good news for the equity
Market. ‘As long as’ being the operative
words.
To be sure, there
are factors that could activate those operative words: (1) no trade deal which
would threaten to push earnings growth down dramatically, (2) domestic
political turmoil which depresses investor psychology or (3) signs that the Fed
has lost control of monetary policy [e.g. the current dollar liquidity
problem].
Morgan Stanley
thinks earnings expectations are about the drop.
Corporate buybacks
remain strong; and so does insider selling.
News on Stocks in Our Portfolios
Revenue of $17.19B (+4.2% Y/Y) beats by $260M.
Economics
This Week’s Data
US
Weekly
jobless claims rose 4,000 versus expectations of being flat.
September
nonfarm payroll grew by 136,000 versus an anticipated increase of 145,000;hourly
earnings were flat versus +0.3%; the unemployment rate was 23.5% versus 3.7%
August
factory orders were down 01.% versus consensus of -0.2%; ex transportation they
were 0.0% versus +0.1%.
The
August trade deficit was $54.9 billion versus projections of $54.5 billion.
The
September Markit services PMI came in at 50.9, in line; the composite PMI was
51.0, also in line.
The
September ISM nonmanufacturing index was 52.6 versus estimates of 55.0.
International
The September German
construction PMI was 50.1 versus expectations of 47.0.
September UK new car sales were
up 1.3% versus consensus of -2.0%.
Other
The
Fed’s immoral inflation policy.
What
I am reading today
The
historic basis of the Japanese/South Korean trade dispute.
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