The Morning Call
10/8/19
This is OU/Texas week, which
means I have a lot of non-work related work.
Reporting will be sporadic to nonexistent. For sure, no Closing Bell.
The
Market
Technical
The Averages (26478,
2938) rested yesterday. Volume declined
and breadth weakened. The good news is
that they ended above both MA’s. The bad
news is that (1) there was no follow through from Friday spike up; indeed, it
made last Friday a lower high and (2) intraday the VIX traded below the lower boundary
of a very short term uptrend and its 200 DMA and bounced hard to close above
both.
I still think the
pin action supports the assumption that momentum remains to the upside. But there is enough cognitive dissonance
coming from multiple sources that if the indices can’t make a new high, that
assumption comes into question.
GLD and TLT were down
and the dollar was up, a vote for a stronger economy.
Monday in the
charts.
Fundamental
Headlines
One minor datapoint was released yesterday. August consumer credit grew more rapidly than expected.
Why a manufacturing recession matters.
Overseas, the numbers continued to
disappoint. The August Japanese
leading economic indicators and August German factory orders were well below
estimates.
The news flow elsewhere was quiet. The biggest headline being a statement out of
China that it was not prepared to do an all encompassing trade deal which the Donald
is advocating. So, what does he do? Fold to get a deal to enhance is re-election
odds or hang tough to do the right thing?
***overnight, the answer
(1)
US is blacklisting Chinese tech companies [we should have done this a long time ago,
instead of imposing tariffs]
(2)
there is a
report that the US is considering soft capital controls on China and that the
Chinese may leave the negotiations a day early.
(3)
odds of no-deal Brexit just went up.
Bottom line:
the economic data is not reading any better. 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. 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].
How capitalism has been distorted (must read).
News on Stocks in Our Portfolios
Economics
This Week’s Data
US
August
consumer credit grew $17.9 billion
versus estimates of $15.2 billion.
The
September small business optimism index was reported at 101.8 versus forecasts
of 104.1.
September
PPI fell 0.3% versus expectations of +0.2%; core PPI was +2.0% versus +2.3%
International
August
Japanese household spending rose 2.4% versus projections of +2.8%; cash earnings
fell 0.2% versus -0.1%.
August
German industrial production rose 0.3% versus consensus of -0.1%.
The
September Chinese Caixin services PMI came in at 51.3 versus an anticipated
reading of 52.9.
Other
The
myth of income stagnation.
The
ratio of part time employed.
What
I am reading today
Where
is the Sun located in the Milky Way?
Investment
problems that make your head hurt.
The latest on Turkey,
Syria and the US.
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for Survival’s website (http://investingforsurvival.com/home)
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