The Averages (27001, 2989) were off fractionally yesterday on lower volume and mixed breadth. Still, they ended solidly above both MA’s and in uptrends across all timeframes. The VIX rebounded 1%, bouncing off the 9/20 low (a slight negative for stocks). The other downbeat sign is the October 11th gap up opens which need to be closed. Overall, this pin action doesn’t change my assumption that momentum remains to the upside and that the all-time highs (27398, 3027) will be challenged.
Gold rallied back above the lower boundary of its pennant formation, leaving that technical pattern intact. TLT was up slightly, remaining close to challenging its 100 DMA but finishing in uptrends across all time frames. The dollar was down ¼% but its chart is the strongest among those I follow.
The yield curve has dis-inverted. Are we safe now?
Despite the institution of NotQE, the overnight repo market is again experiencing liquidity problems.
Wednesday in the charts.
Yesterday’s numbers were mixed: August business inventories/sales and the October housing index were positive; weekly mortgage/purchase applications neutral; and September retail sales (primary indicator) were terrible.
Update on big four economic indicators.
Also, the Fed released its latest Beige Book which downgraded the economic growth outlook. Somewhat surprisingly, it expressed concern about the labor market---which is a lagging indicator. The bottom line is that it set up the Fed for more rate cuts.
Overseas, the September UK CPI and PPI came in lower than anticipated; September EU CPI was in line; the August EU trade surplus was smaller than expected.
More thoughts on the US/China trade war.
Bottom line: while the technical position of the Market suggests further upside, equities are overvalued on a historical basis. So, I am focused on taking advantage of strength that drives a stock’s price into its Sell Half Range. This strategy is not undisciplined selling; but targeted selling of a portion of the holdings of a successful investment. But that said, this strategy has raised my cash position to near 50%. A level that helps me sleep well a night even after a 300 up day in the Dow.
In my quarterly review of Gilead Sciences (GILD), it failed to meet the minimum quantitative criteria for inclusion in the Aggressive Growth Universe. Accordingly, the Aggressive Growth Portfolio is Selling its position in GILD.
News on Stocks in Our Portfolios
Sherwin Williams (NYSE:SHW) declares $1.13/share quarterly dividend, in line with previous.
Paychex (NASDAQ:PAYX) declares $0.62/share quarterly dividend, in line with previous.
This Week’s Data
August business inventories were unchanged as sales rose 0.2%.
September retail sales fell 0.3% versus estimates of up 0.3%; ex autos, they declined 0.1% versus +0.2%.
The October housing index came in at 71 versus consensus of 68.
Weekly jobless claims increased by 4,000 versus expectations of up 5,000.
September housing starts fell 9.4% versus projections of -8.6%; building permits dropped 2.7% versus forecasts of -5.2%.
The October Philadelphia Fed manufacturing index was reported at 5.6 versus projections of 8.
August EU construction output rose 1.2% versus estimates of +2.6%.
September UK retail sales were flat, in line; ex fuel, they rose 0.2% versus consensus of -0.1%.
What I am reading today
Inside the decline in out of pocket health insurance costs.
Defer gratification and save.
You will never change your life unless you change what you do in your life daily.
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