The Morning Call
11/21/19
The
Market
Technical
The Averages (27821,
3108) had their worst day in almost two months, though. In absolute terms, their
decline was not all that much especially on a day when we got lousy trade headlines. Breadth was weak again. But I have been noting that the Market was
getting very overbought condition---for how long? Oddly, the VIX was down which suggests that investors
are not that concerned. In the short
term, more downside should be expected. Volume
rose again which is the opposite of what you want in a selloff. Still, momentum remains to the upside though
those nagging October 11th gap up opens need to be closed.
The bond market was
rose another 1 %, finishing above its 100 DMA (now resistance; if it remains
there through the close on Friday, it will revert to support). If the challenge is successful, the downward momentum
in TLT will clearly be over. The only
remaining negative is that it is still in a very short term trend of lower
highs.
The dollar was unchanged,
holding right on the lower boundary of its short term uptrend.
Gold advanced seven
cents, and is that much nearer to challenging both the upper boundary of its
very short term uptrend and its 100 DMA---which if successful would halt its
current downward momentum and point to a weaker economy.
The UUP, TLT and
GLD are all nearing or in the process of challenging key support/resistance levels
which if successful would not only mark a change in momentum but also imply a
reversal in economic perceptions. Were
TLT and GLD to successfully challenge the aforementioned resistance levels and
the dollar hold its uptrend, it would suggest a flight to safety. If the dollar breaks down, it would imply a
weaker economy.
Wednesday in the charts.
Fundamental
Headlines
There was only
one minor datapoint released yesterday. Weekly
mortgage applications were down but purchase applications were up.
The latest business
cycle risk report.
Overseas,
the October Japanese trade surplus and October German PPI were both disappointing.
The Fed released
the minutes of its latest FOMC meeting, the bottom line of which didn’t change
from the narrative that we have heard of late: no more rate cuts, but no
increases even if the economy starts to heat up and NotQE until at least
April.
***overnight, ECB
semi mea culpa.
On trade:
(1)
the house joined the senate in supporting the Hong
Kong protestors which surely will not make a trade deal any easier.
Here is a pessimist’s
view of congressional support for the protestors.
(2 ) White House sources
suggest that there may not be a Phase one deal by December.
I thought
that the following quote from Zerohedge adequately reflects the state of
US/Chinese trade negotiations;
‘The barrage of news, facts, rumor, innuendo, speculation and
outright lies, started around noon on Wednesday, when Reuters reported that the
trade deal could be delayed into 2020, while Global Times' EIC sniped
periodically from his twitter account warning that China is ready for
full-blown trade war. Futures then staged their latest miraculous comeback,
gravitating around the "gamma gravity" of S&P 3,100 before the
House passed the Bill of support for Hong Kong protestors just after 5pm, once
again spooking futures, especially after Bloomberg reported that Trump would
likely sign the bill. Futures then slid to session lows again before rebounding
on a Bloomberg report that China's top trade negotiator Liu He was
"cautiously optimistic" if "confused" at a dinner on
Wednesday, even if Bloomberg failed to point out that due to the magic of time
zones, the dinner took place some 12 hours earlier. A few hours later, around
2am, futures pushed to session highs after China's commerce ministry said that China will "strive to reach an initial trade
agreement" with the United States as both sides keep communication
channels open. The good mood lasted for about an hour, when senior Chinese
diplomat Wawng Yi said China "resolutely opposes" US lawmakers
passing the Hong Kong human rights bill. Then, pessimism quickly turned to
optimism just after 5am when the WSJ reported that China invited US trade
negotiators to Beijing for further talks. The burst higher quickly faded when
algos read a little deeper into the article to find that the phone call
invitation took place last week, long before all the latest turmoil took place.
As the WSJ added "US negotiators said they would be willing to meet in
person, but would be reluctant travel all the way to China, unless they make it
clear that it would make commitments on IP protection, forced technology
transfers and ag purchases." Needless to say, there was no trip.’
***this
just in, sources say US may delay implementation of December 15 tariff increases
even if no deal has been reached.
(3
) the risk
of a trade war with the EU remain.
Bottom line: in my opinion, the calm with
which investors took the lousy trade news yesterday is likely a function of the
prevailing sentiment that the Fed has their back (i.e. will continue to pursue
NotQE with abandon). As long as NotQE is
in play, I believe that stocks will continue to work their way higher,
valuations be damned.
Valuations from Dr.
Ed.
More on valuations.
News on Stocks in Our Portfolios
Economics
This Week’s Data
US
Weekly
jobless claims rose 3,000 versus expectations of a 7,000 decline.
The
November Philadelphia Fed manufacturing index came in at +3 versus estimates of
-7.
International
Other
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Monetary Theory comes to congress.
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trader turns bearish on oil.
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I am reading today
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