The Morning Call
11/11/19
The
Market
Technical
The S&P continues to perform well, no
matter the latest trade headlines. A lot
of Market gurus keep saying that the resolution of the US/China trade dispute
is critical to stock price momentum. But
this Market has been advancing on days of good trade news (usually a
substantial move) and on days when the news is disappointing (either a minor
decline, no price movement or a price increase). So, it appears to me that the upward momentum
remains. But there are a couple of minor
potential problems: (1) on the current very short term move, momentum is losing
some strength, (2) the indices are in overbought territory, (3) the October 11th
gap up opens still need to be closed.
The long bond was down another ½% on
Friday. It has now firmly taken out the
support offered by the 9/13 low; and its 100 DMA has reverted to
resistance. Importantly, it is on top of
two other significant support levels: the lower boundary of its short term
uptrend and its 200 DMA. If it can hold
those two levels, then the worst of the price performance for TLT would be
over. On the other hand, if it
successfully challenges those trends, there is no visible support for another
20 points on the downside.
In the past week, the dollar
challenged both its 100 DMA and the lower boundary of its short term uptrend,
failed and rebounded sharply. While it
could always mount another challenge, the pin action suggests that probability
diminishes every day.
Gold continued its
slide, ending below its 100 DMA for a second day (now support; if it remains
there through the close today, it will revert to resistance). On the other hand, it is still well above its
200 DMA and the lower boundary of its very short term uptrend; meaning that, on
the one hand, it has plenty of room to find/build a consolidation level and
then move back above its 100 DMA but, on the other hand, it could experience a
good deal more downside before it encounters any support.
The dollar is confirming the stock market’s
assessment that the economy is in for a big improvement. TLT and GLD seem to be in the process of
doing so; though to be clear, they have not yet done so.
The VIX see sawed for most of
last week, but then closed down firmly on Friday. That left it very near to its 7/25 low and
put it more in sync with breadth as an indicator that stocks are in overbought
territory.
Fundamental
Headlines
This is a great
article by John Mauldin on our conflict with China and what we should do about
it.
News on Stocks in Our Portfolios
Economics
This Week’s Data
US
International
October
Chinese CPI came in at +0.9% versus estimates of +0.7%; PPI was -1.6% versus
-1.5%; auto sales fell 6%; loan growth was CY661.3 billion versus CY800 billion.
September
Japanese machinery orders fell 2.9% versus expectations of +0.9%.
October
German PPI declined 0.1%.
September
UK trade deficit was L13.5 billion versus forecasts of -L10 billion; industrial
production was -0.3% versus -0.2%; construction output was +0.5% versus +0.6%;
GDP was +0.9% versus +1.0%
Other
October
rail carloads down.
What
I am reading today
All
the brands that have apologized to China.
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