The Morning Call
10/3/19
The
Market
Technical
The Averages (26078,
2987) had another bad day. Volume picked
up: breadth was poor. The VIX popped another
10 ¾ % ending above its 200 DMA for a second day (now resistance; if it remains
there through the close on Friday, it will revert to support) and above its 100 DMA (now support). The Dow closed its 9/4 gap up open, following
the S&P’s lead on Tuesday. So now the
pull of that gap up open has been removed.
Further, yesterday was a gap down open for both indices which again
needs to be filled (that is a plus).
In addition, both Averages
closed below their 100 DMA’s (both support; if they remain there through the close
on Friday, they will revert to resistance). My assumption for the long term remains that
the momentum is to the upside. If the
Averages successfully challenge both MA’s or if they close yesterday’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 ¼ % continuing to recover 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 1 ¼%). The dollar was off two cents but remains in a
solid uptrend.
More on the bank
repo problem.
Wednesday in the
charts.
Fundamental
Headlines
Another downbeat
day for US stats: weekly mortgage and
purchase applications were up; the September ADP private payroll report came in
less than anticipated and the September
NY Fed ISM index was awful.
Atlanta Fed’s
GDPNow forecast for third quarter growth drops to 1.8%.
Only two
datapoints from overseas: September Japanese consumer confidence and the
September UK construction PMI were well below forecasts.
JP Morgan’s global
manufacturing PMI shrinks again in September.
Two trade related
headlines:
The World Trade
Organization sided with US on illegal Airbus subsidies.
And now US will
impose $7.5 billion in tariffs on EU products on October 18th.
The case for a
trade deal.
Bottom line: investor
concern about the global economy remains front and center as the numbers
continue to deteriorate. As I noted
yesterday, it is too soon to start calling for a recession. However, the economic backdrop was not helped
by the prospect of still more tariffs being imposed in renewed clash between
the US and the EU over trade.
The political
scene continues to heat up over the potential impeachment of Trump. I am refraining from any comments except to
say that the more intense this battle becomes, the more likely it is to negatively
impact both the economy and the Market.
On the other hand,
the worse economic and Market conditions become, the higher the odds of
aggressive central bank intervention. If
history is any guide that will be the narcotic that reliefs anxieties and induces
further mindless buying of assets.
The destructive
nature of negative interest rates (must read):
More on
valuations.
For the bears.
And BofA isn’t all
the positive either.
News on Stocks in Our Portfolios
Revenue of $992M (+15.0% Y/Y) beats by $1.72M.
Economics
This Week’s Data
US
The
September NY Fed ISM index came in at 42.8 versus estimates of 47.5.
September
light vehicle sales were 17.2 million versus consensus of 17.0 million
(Speaking
of autos, here is the latest auto loan stats.)
International
August
EU retail sales were up 0.3%, in line; August PPI fell 0.5% versus -0.3%; the September
services PMI came in at 51.6 versus
52.0; the composite PMI was 50.1 versus 50.4
The September
German services PMI was 51.4 versus estimates of 52.5; the composite PMI was
50.1 versus 50.4.
The
September Japanese services PMI was 52.8, in line; the composite PMI was 51.5,
also in line.
Other
The
IMF after Argentina.
Latest
Brexit plan gets cool reception.
What
I am reading today
Are wealth taxes a good
idea?
Another example of our education
system gone haywire.
China introduces ‘doomsday’ bomb while
US military concentrates on diversity.
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