The Morning Call--Powell trumps economy

The Morning Call

11/19/19

The Market

         

    Technical

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.

https://www.usatoday.com/story/money/investing/2019/11/15/stock-market-warning-wall-street-overlooking/40612079/

So,  momentum remains to the upside; but there are still some short term negatives:  (1) October 11^th 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.

            https://www.zerohedge.com/markets/stocks-bonds-bid-dollar-skids-powell-pontification-trumps-trade-pessimism

    Fundamental

       Headlines

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

            Update on big four economic indicators.

            https://www.advisorperspectives.com/dshort/updates/2019/11/15/the-big-four-economic-indicators-october-real-retail-sales

            No data from overseas.

            Why global economic growth isn’t coming.

            https://www.zerohedge.com/economics/heres-why-global-economic-recovery-not-coming

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

            https://www.zerohedge.com/economics/world-trade-barometer-suggest-global-economy-continues-plunge-trade-takes-toll

            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?

            https://www.bloomberg.com/news/articles/2019-11-18/china-u-s-trade-talks-continue-with-some-signs-of-progress?srnd=economics-vp

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

            https://www.zerohedge.com/markets/fed-says-powell-unexpectedly-met-trump-mnuchin-monday-morning

            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.

            https://alephblog.com/2019/11/16/the-sirens-call/

            When will the party get out of hand?

            https://www.zerohedge.com/markets/market-has-not-only-priced-qe4-it-also-pricing-qe5

            Morgan Stanley’s outlook for 2020.

            https://www.bloomberg.com/news/articles/2019-11-18/morgan-stanley-sees-u-s-underperforming-in-2020-across-markets

            Dividend growth expected to slow in 2020.

            https://www.ft.com/content/a0a7e926-07c8-11ea-a984-fbbacad9e7dd

    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.

Economics

   This Week’s Data

      US

            The November housing index was reported at 70 versus estimates of 71.

            https://www.advisorperspectives.com/dshort/updates/2019/11/18/nahb-housing-market-index-builder-confidence-holds-firm-in-november

    

            October housing starts rose 3.8% versus forecasts of +0.6%; building permits were up 5.0% versus 0.0%.

    International

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

    Other

            Uncle Sam’s debt explosion.

            https://nypost.com/2019/11/16/uncle-sams-debt-explosion/

            The road to default.

            https://www.advisorperspectives.com/commentaries/2019/11/15/the-road-to-default

            NotQE raising market concerns.

            https://www.politico.com/news/2019/11/15/federal-reserve-funding-markets-071142

What I am reading today

            Losing sight of what is important.

            https://calibratingcapital.com/a-50-family-fable/

            Quote of the day.

            https://cafehayek.com/2019/11/quotation-of-the-day-2982.html?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+CafeHayek+%28Cafe+Hayek%29

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