Tuesday, November 19, 2019

The Morning Call--Powell trumps economy

The Morning Call


The Market

The Averages (28036, 3122) inched ahead yesterday.  Breadth was strong and pushed further into overvalued territory.  However, the VIX was up 3 ½% (unusual for an up day in stocks) which gives the indices room to become more overbought. Volume, as usual, was down.

So,  momentum remains 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 off 1/8 %.  It is currently trading between an easily discernable resistance level (100 DMA) and an equally defined support level (the lower boundary of its very short term uptrend).  A successful challenge of one of these levels should provide directional information.

The dollar fell 1/8%, ending right on the lower boundary of its short term uptrend.

Gold rose 3/8%, and is nearing a challenge of both the upper boundary of its very short term uptrend and its 100 DMA which if successful would halt its current downward momentum.

The UUP, TLT and GLD are all nearing support/resistance levels which if successfully challenged would not only mark a change in momentum but also imply a reversal in economic perceptions. 

            Monday in the charts.



            Only one stat released yesterday.  The November housing index was below expectations.

            Update on big four economic indicators.

            No data from overseas.

            Why global economic growth isn’t coming.

            World Trade Organization barometer suggests global economic growth continues to plunge.

            In other news:

            Early one, there were continuing signs of progress in the US/China trade talks.  Though later in the day, there were reports out of China that those earlier reports were too optimistic.  In other words, who knows?

            In addition, there was a surprise Trump/Powell meeting in which Powell hung tough.

            Bottom line: everyday the indices and major sectors of the Market get ever more overvalued notwithstanding mediocre if not lousy economic data and the intraday headline reversals on trade.  Thank you NotQE.  History says that as along as the Fed pursues its current irresponsibly accommodative monetary policy, asset prices will go higher---until investors lose faith in the Fed.

            Enjoy this Market while it lasts; but it makes sense to be building cash to provide some stability and serve as a source of buying power when stock prices are lower.

            When will the party get out of hand?

            Morgan Stanley’s outlook for 2020.

            Dividend growth expected to slow in 2020.

    News on Stocks in Our Portfolios

General Mills (NYSE:GIS) declares $0.49/share quarterly dividend, in line with previous.

Genuine Parts Company (NYSE:GPC) declares $0.7625/share quarterly dividend, in line with previous.

Medtronic (NYSE:MDT): Q2 Non-GAAP EPS of $1.31 beats by $0.03; GAAP EPS of $1.01 beats by $0.15.
Revenue of $7.71B (+3.0% Y/Y) beats by $50M.

Home Depot (NYSE:HD): Q3 GAAP EPS of $2.53 in-line.
Revenue of $27.22B (+3.5% Y/Y) misses by $290M.


   This Week’s Data


            The November housing index was reported at 70 versus estimates of 71.
            October housing starts rose 3.8% versus forecasts of +0.6%; building permits were up 5.0% versus 0.0%.


            September EU construction output fell 0.7% versus consensus of +2.7%.


            Uncle Sam’s debt explosion.

            The road to default.

            NotQE raising market concerns.

What I am reading today

            Losing sight of what is important.
            Quote of the day.

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