Tuesday, November 12, 2019

The Morning Call---Overbought

The Morning Call


The Market

The Averages (27691, 3087) turned in a mixed performance (Dow up, S&P down) on a semi-holiday day.  Volume was lower (not surprising); but breadth was quite strong (surprising on a mixed low volume day), pushing it still further into overbought territory. The VIX was up 5 1/8%---but still supports the breadth overbought reading. 

My assumption remains that momentum is to the upside; but there are still some short term negatives:  (1) October 11th gap up opens need to be closed and (2) the VIX and breadth suggest equities are overbought.

The bond market was closed.  The dollar was off 1/8%, but its chart remains strong.

Gold was down another ¼ %, ending below its 100 DMA for a third day, reverting to resistance.  However, it is still well above its 200 DMA and the lower boundary of its short term uptrend; meaning it has plenty more room on the downside before meeting any significant support.

            Another deep dive into the problems in the repo market.

Monday in the charts.



            No US stats reported yesterday.

            Overseas, there was plenty. October Chinese CPI was hotter than estimates while  PPI was cooler; auto sales declined as did loan growth.

            September Japanese machinery orders fell more than expected.

September UK trade deficit was larger than forecast while industrial production, construction output and GDP were less.  October German PPI declined.

As you might expect, all was quiet on the Western front on a semi-holiday.  The news flow will pick up today with a speech by the Donald.  Then on Thursday, the Fed releases an update to its bill purchase program (NotQE). Finally, a giant data dump on Friday that will include October retail sales and industrial production.
            And another consumer confidence measure will also be released.

                Bottom line: I think that the technical condition of the Market (overbought) is the story for the very short term.  However, assuming the Fed reaffirms its commitment to NotQE on Thursday, any pullback will should be limited. 

           That doesn’t mean that large sectors of the stock market aren’t dramatically overvalued.

            An argument against stocks being overvalued.

            And why they may stay that way.

            But the big boys disagree.

    News on Stocks in Our Portfolios


   This Week’s Data


            The October small business optimism index came in at 102.4 versus projections of 103.5.


            October Japanese machine tool orders fell 37.4% versus forecasts of -30.0%

            Weekly UK unemployment rose by 8,000 jobs versus estimates of up 38,000; September unemployment was 3.8% versus 3.9%; average (consumer) earnings were up 3.5% versus +3.8%; preliminary Q3 productivity was +0.3% versus -0.2%.

            November EU economic sentiment was -1 versus expectations of -32.5.

            November German economic sentiment was -2.1 versus consensus of -13.


            US heavy truck sales up in October.

            LA port traffic down in October.

            What economists don’t know about the economy.

What I am reading today

            Retirement math.

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