The Morning Call
10/25/19
The
Market
Technical
The Averages (26805,
3010) turned in a mixed performance yesterday (Dow down, S&P up) on slightly
higher volume and poor breadth. The VIX fell another 2 1/8 % ( a bigger drop
than I would expect on a mixed day---but that is a plus for stocks). The indices ended solidly above both MA’s and
in uptrends across all timeframes.
Three somewhat
worrisome details are (1) the indices have successfully challenged the lower
boundaries of their very short term uptrends, (2) they have now made another
lower high [4th to 7th depending on who is counting] and
(3) short term, the October 11th gap up opens need to be closed. My assumption remains that momentum is to the
upside and that the all-time highs (27398, 3027) will be challenged; however, the
more follow through to the downside, the weaker my conviction gets.
Where is the buyback
beef?
TLT declined ¼%,
but remained above its recent low and finishing above both MA’s and in uptrends across all time frames.
Gold was up ¾%, breaking
above the upper boundary its pennant formation; if it remains there through the
close today, my assumption is that it has made a short term bottom and its
price is headed higher.
The dollar rose
3/8%, continuing its bounce off its 100 DMA and the lower boundary of its short
term uptrend.
The liquidity
problem keeps getting worse.
GLD, TLT and UUP
were all in safety trade mode. Let’s see
if it lasts.
Thursday in the
charts.
Fundamental
Headlines
Yesterday’s data was
weighed to the negative: the October Kansas City Fed manufacturing index and
the October flash manufacturing PMI were better than anticipated; September new
home sales fell but were in line (primary indicator), so was the October flash
services PMI; weekly jobless claims, September durable goods orders (primary
indicator) and the October flash composite PMI were below estimates
The global stats
were worse: the October Japanese, German and EU flash manufacturing, services
and composite PMI’s were less than forecasts as was October EU consumer
confidence.
Latest
on Brexit.
Bottom line: the
bad news in yesterday’s major events were (1) Brexit is getting more uncertain,
not less [see above], (2) Pence slapping around the Chinese and (3) the
dataflow is getting worse. The good news
is (1) the continuing trend of positive earnings beats [though there have been
disappointments] and (2) NotQE is in overdrive.
***overnight,
China’s response to Pence.
There
is no question in my mind that the positives outweighed the negatives with this
caveat: while the Market seems unconcerned about the liquidity problems in
global financial system which are a major driver of NotQE, that doesn’t mean this
situation shouldn’t be worried about or won’t deteriorate to the point where it
becomes an investor concern.
Longer term,
valuations in major sectors of the Market are extraordinarily expensive; and
some mean reversion seems inevitable. I
want to take some profits in those overvalued sectors and use it to buy stocks
that have been beaten up on any Market dip.
Decompression
in the leveraged loan market is a sign that revaluation could be coming,
News on Stocks in Our Portfolios
T. Rowe Price (NASDAQ:TROW): Q3 Non-GAAP EPS of
$2.13 beats by $0.16; GAAP EPS of $2.23 beats
by $0.23.
Revenue of $1.43B (+2.9% Y/Y) misses by $10M.
Revenue of $3.39B (+5.3% Y/Y) misses by $30M.
V.F. Corp (NYSE:VFC) declares $0.48/share quarterly dividend, 11.6% increase from
prior dividend of $0.43.
Economics
This Week’s Data
US
September
new home sales fell 0.7%, in line.
The
October flash manufacturing PMI came in at 51.5 versus estimates of 50.7; the
services PMI was 51.0, in line; the composite PMI was 51.2 versus 51.5.
The
October Kansas City Fed manufacturing index was reported at 8 versus
expectations of 4.
International
October
German consumer confidence came in at 9.6 versus forecasts of 9.8; business
conditions were 94.6 versus 94.5.
Other
Economics
and cognitive dissonance.
How
the fix the student loan mess.
A
progressive’s view of what is happening in Chile.
What
I am reading today
2019
microphotography competition.
The dinosaur killing
asteroid acidified the oceans.
Another low for the snowflake generation.
New and improved ways of giving away
your money.
Ten questions to ask about Trump’s
withdrawal from Syria (today’s must read).
Trump may be reversing himself on
Syrian withdrawal.
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