The Morning Call
10/24/19
The
Market
Technical
The Averages (26833,
3004) inched higher yesterday on lower volume (not good when the volume goes down
on up days) and mixed breadth. The VIX fell
3 1/8 % ( bigger drop than I would expect on a slight up 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) they
have broken below very short term uptrends, (2) they have now made another
lower high [4th to 7th depending on who is counting] and
(2) 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.
Gold was up ¼ %,
which left it within a narrowing range (about a one point difference) defined
by the developing pennant formation. It
also closed above the low set 9/10.
TLT rose 1/8 %, finishing
above both MA’s and in uptrends across
all time frames.
The dollar was off
one cent, leaving it above its 100 DMA and the lower boundary of its short term
uptrend.
The Fed again
expands its liquidity provisions.
This kind of
intervention can’t be good (except maybe for stocks short term). Must read.
Using the dollar
as an economic weapon. This is a decent
review of the subject, but it in no way leads to the author’ conclusion---‘the
stage would be set for a devastating conflict’.
GLD, TLT and UUP
were all in safety trade mode. Let’s see
if it lasts.
Wednesday in the charts.
Fundamental
Headlines
One minor
datapoint was released yesterday: weekly mortgage and purchase applications
fell.
Where
did all the stimulus go?
Overseas,
there also only one stat: October EU consumer confidence was down more than anticipated.
It
was another day of slow news except for earnings reports. I did find an update on Brexit stands.
***overnight,
Chinese ag purchases are a nothing burger.
Bottom line: earnings
reports were again the major headlines.
They continue to be somewhat better than expected; and investors are
giving a pass to those who disappoint (think CAT).
The other
development impacting the Market is the new NotQE (see linked articles above). The Fed is shoveling liquidity into the
financial system; and if history is a guide, that should mean higher stock
prices. That said, as I have noted the last couple of days, the Averages have
been unable make a new high in the face of this new liquidity impulse. That is a
potential negative for the Market; although it makes no sense to assume that the
Fed/Market co-dependency is breaking down until there is much stronger evidence
than we have now.
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.
In yesterday’s
Morning Call, I linked to an article explaining how QE led to the misallocation of assets, the loss of productivity
and wage growth. Here is an example of
that misallocation of assets.
Useful biases.
News on Stocks in Our Portfolios
W.W. Grainger (NYSE:GWW): Q3 Non-GAAP EPS of
$4.26 misses by $0.14; GAAP EPS of $4.25 misses
by $0.08.
Revenue of $2.95B (+4.2% Y/Y) beats by $10M.
Revenue of $33.1B (+13.7% Y/Y) beats by $860M.
Revenue of $7.99B (-2.0% Y/Y) misses by $210M.
Apple (NASDAQ:AAPL)
declares $0.57/share quarterly dividend, in line with previous.
Economics
This Week’s Data
US
September
durable goods orders fell 1.2% versus consensus of -0.8%; ex transportation
they were -0.3% versus -0.2%.
Weekly
jobless claims declined 1,000 versus projections of down 8,000.
International
October
EU consumer confidence was reported at -7.6 versus estimates of -6.7.
The
October Japanese flash manufacturing PMI was 48.5 versus forecasts of 48.8; the
services PMI was 50.3 versus 51; the composite PMI was 49.8 versus 50.2. Its August leading economic indicators were
91.9 versus 91.7.
The
October German flash manufacturing PMI was 41.9 versus 42; the services PMI was
51.2 versus 52.0; the composite PMI was 48.6 versus 48.8.
The
October EU flash manufacturing PMI was 45.7 versus 46; the services PMI was 51.8
versus 51.9; the composite PMI was 50.2 versus 50.3.
Other
September
architectural billings were less bad than in August.
What
I am reading today
The
rise and fall of the Roman republic (part 2).
The
changing American diet.
Guilt is no excuse for a tax.
Elizabeth Warren is running out of
fake money to pay for her programs.
Quote of the day.
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