The Morning Call
11/1/19
The
Market
Technical
The Averages
(27046, 3037) had a rough day. The bad
news is that (1) the Dow violated the lower boundary of its very short term
uptrend one day after resetting it and (2) the S&P closed right on the
boundary of its very short term uptrend.
The good news is that the S&P filled its 10/28 gap up open. Volume was up; breadth deteriorated. The VIX rose 7 ¼ %, pushing away from its
7/25 low (= S&P 7/25 high).
My assumption
remains that momentum is to the upside; but there remain some negatives: (1) the Dow is now out of sync with the
S&P, (2) October 11th gap up opens need to be closed..
TLT popped another
1 3/8 %, taking another step away from the threat to the loss of momentum. The dollar was down again by ¼%, finishing below
the lower boundary of its short term uptrend (if it remains there through the
close on Monday, it will reset to a trading range). Gold rose 1 %, ending back above the upper
boundary of that pennant formation. I am
still uncertain about the strength of the directional move following the
breakout from the tip. All this points
to a concern about the economy---notwithstanding the Fed’s goldilocks
assessment.
Thursday in the charts.
Fundamental
Headlines
Yesterday, the
numbers turned mixed after Wednesday’s one day hiatus: September personal
income and spending came in line but weekly jobless claims and the October
Chicago PMI were disappointing.
The odds of a
recession.
Update on big four
economic indicators.
Overseas, October
German inflation was above forecasts while retail sales were below; September
Japanese industrial production and October consumer confidence and housing
starts were better than expected; October UK consumer confidence was less than
consensus; September Chinese manufacturing and nonmanufacturing PMI’s as well
as the trade balance were disappointing;
Q3 EU flash GDP growth was better than anticipated while unemployment
was worse and CPI was in line.
Bottom line: aside
from the impeachment theatrics, the economic data was the main headline
yesterday---with the very poor Chicago PMI being the stat that drew
attention. As you know, I believe that
the US economy will continue to grow at a sluggish rate; but I also have
questioned the Fed’s upbeat narrative.
So, it doesn’t surprise me that a poor datapoint rattles investors.
That
said, there remain some very powerful forces that can propel stock prices
higher: better than expected earnings, strong seasonal biases and, above all, a
Fed whose main goal is keeping the Market advance intact.
In
my opinion, the only way lousy economic numbers will cause anything other than
a short term Market hiccup is if investors finally realize just how destructive
monetary policy has been on the secular growth rate of the economy.
News on Stocks in Our Portfolios
Economics
This Week’s Data
US
The
October Chicago PMI came in at 43.2 versus expectations of 48.0.
October nonfarm payrolls
grew by 128,000 versus forecasts of an 89,000 increase.
International
The
October Chinese Caixin manufacturing PMI was reported at 51.7 versus estimates
of 51.0.
The
October UK manufacturing PMI was 49.6 versus consensus of 48.1.
Other
Update
on Philly Fed ADS business conditions index.
Another
Chinese bank on the verge of collapse.
And
a Chinese steel maker defaults.
What
I am reading today
When Martin Luther
changed the world.
The
rise and fall of the Roman Empire (part 3).
Teachers
strike while test scores drop.
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