The Morning Call
11/13/19
The
Market
Technical
The Averages (27691,
3091) turned in a second day of mixed performance (Dow unchanged, S&P up). Volume was up slightly (but still quite low);
but breadth was flat but remains in overbought territory. The VIX was down a
penny---continuing to support 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
up ½%, bouncing off the lower boundary of its very short term uptrend---its
first challenge post 100 DMA reversion to resistance. If that
boundary can hold, then the worst may be over for TLT.
The dollar rose
1/8% and remains strong.
Gold advanced ¼ %,
but momentum remains to the downside with little support visible before it hits
its 200 DMA (six points lower). Given
the pin action in TLT and UUP, gold’s rise may just be a reflexive bounce off a
somewhat oversold condition.
Tuesday in the
charts.
Fundamental
Headlines
Yesterday’s
numbers were disappointing. Month to date
retail chain store sales growth slowed and the October small business optimism index
was below estimates.
Overseas, the
data was turned positive. October Japanese
machine tool orders and September UK personal income were less than anticipated
while weekly UK unemployment rose, September unemployment, preliminary Q3
productivity, November EU and German economic sentiment were above
expectations.
The main headline
of the day was Trump’s speech to the Economics Club of New York in which he
patted himself on the back (as always), beat the Fed about the head and
shoulders (again) but was noncommittal on a US/China trade deal.
***overnight,
Trump cranked up rhetoric, threatening China will higher tariffs if there is no
Phase One deal.
China’s unofficial
response.
I think that this
analyst makes an interesting point: since
industrial policy and IP theft are the motivating factors behind the US/China
trade dispute, it seems reasonable to focus on combating those specific
policies, per the below example, versus a broader trade/tariff war. So, a Phase One that is accompanied by ‘national
defense’ measures to combat unfair Chinese trade practices could work.
And as November 2020
looms, middle class tax cuts are back on the table.
Bottom line: the data
isn’t supporting the current Market narrative that the economy is about to
improve its rate of growth. Trump’s
speech (1) was somewhat disappointing to those wanting a trade deal, though the
consensus remains that one is coming and (2) advocated the Fed embrace negative
interest rates which, if implemented, would only make the misallocation and
mispricing of assets worse. Meanwhile,
his chief economic advisor indicated that additional tax cuts are being
considered at a time when the economy is at full employment and the budget
deficit and national debt grow ever larger.
I
don’t think that I could come up with a worse set of headlines, barring Iran
nuking Israel. Yet the investors appear
unconcerned. Thank you NotQE. (we will
get a update on that from a Powell speech today)
I
will continue to focus on those stocks that have traded into the Sell Half
Range and act accordingly.
News on Stocks in Our Portfolios
Automatic Data Processing (NASDAQ:ADP) declares $0.91/share quarterly dividend, 15.2% increase from
prior dividend of $0.79.
Economics
This Week’s Data
US
Month
to date retail chain store sales growth slowed from the prior week.
Weekly
mortgage applications rose 9.6% and purchase applications were up 5.1%.
October
CPI came in at +0.4% versus estimates of +0.3%; core CPI was +0.2%, in line
International
October
Japanese PPI increased 1.1% versus expectations of +1.2%.
October
German CPI was +0.1%. in line.
October
UK PPI was -0.1% versus estimates of +0.1%; CPI was -0.2% versus -0.1%; core
CPI was +0.1% versus flat.
September
EU industrial production advanced 0.1% versus consensus of -0.3%.
Other
Update
on auto loans.
The
leading index for commercial real estate was up in October.
The
rising Chinese demand for pork.
The
latest on Brexit.
What
I am reading today
The Warren Medicare for All plan
has been released. Here is an initial take
on the math.
Reducing stress. Now I know why I love the beach so much.
Scientists detect huge thermonuclear
blast in space.
Lessons from a master.
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for Survival’s website (http://investingforsurvival.com/home)
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