Thursday, November 7, 2019

The Morning Call---A waste of time

The Morning Call


The Market

The Averages (27492, 3076) were flat yesterday (the S&P was up fractionally). Volume declined as did breadth. The VIX was down 3 5/8%, but still isn’t approaching its 9/25 low, leaving equities with more upside before getting overbought. 

My assumption remains that momentum is to the upside; but there are still some negatives:  (1) October 11th gap up opens need to be closed, (2) both had gap up opens on Monday, and (3) breadth is nearer to overbought.

TLT was up 5/8 %, bouncing off its 9/13 low and closing below its 100 DMA for a second day (now support; if it remains there through the close today, it will revert to resistance).  The dollar was unchanged, maintaining its upward momentum.  Gold rose 3/8%, but still finished below the tip of that pennant formation.   However, it remains above both MA’s and in very short term and short term uptrends

TLT, UUP and GLD remain near potentially critical junctures.  We know the Averages are telling us to tip toe through the tulips.  While the dollar’s short term pin action has been positive, supporting that notion, it is still very close to challenging both its 100 DMA and the lower boundary of its short term uptrend (in other words, it could change direction in a heartbeat).  The long bond is close to suggesting a stronger economy.  As is GLD, though it remains above both MA’s and in very short term and short term uptrends.

            Wednesday in the charts.



Yesterday’s stats were downbeat: weekly mortgage and purchase applications fell and preliminary Q3 nonfarm productivity and unit labor costs were very disappointing.

            Bloomberg US economic recession tracker.

            Inflation expectations remain low.

            Atlanta Fed Q4 GDP now forecast shows growth of 1%.

            Economic impact of the US/China trade war.

Overseas, October Japanese services and composite PMI’s were below expectations while October German and EU services and composite PMI’s were above.  September EU retail sales were in line.

            ***overnight, Bank of England leaves rates unchanged but lowers economic outlook.

            There was one trade headline yesterday.  Xi said that it was too soon to rush to trade agreement.

            ***overnight, the Chinese press reportedly said that the US and China had agreed to a roll back in tariffs            .  However, some analysts are questioning the initial translation of the report.

            And in an interview, Ray Dalio expounded on my two favorite subjects: fiscal profligacy and the mispricing and misallocation of assets.

Bottom line: clearly, the US/China trade talks are in a state of flux; so, I am going to quit making assumptions about what is occurring.  That said, my bottom line hasn’t changed.  Any agreement will likely improve the short term economic outlook; but it will not address the issues the prompted the trade war in the first place (unfair Chinese industrial and IP theft policies) and I continue to believe that they never will be. 

In the meantime, third quarter earnings season continues to come in ahead of expectations, the Market now in the most favorable trading period of the year and the global central banks are duking it out over who can out ease who.  On the latter point,  I continue to maintain that it will be the primary driver of stock prices---at least until investors realize how destructive monetary policy has been. 

I still believe that huge segments of the stock market are grossly overvalued and that any further advance will only make them more so.  Caveat emptor.

    News on Stocks in Our Portfolios


   This Week’s Data


            Weekly jobless claims fell 8,000 versus forecasts of down 4,000.


            September German industrial production fell 0.6% versus estimates of -0.4%; the October construction PMI was 51.5 versus 50.5.


What I am reading today

            Energy breakthrough could store solar power for decades.

            As short history of the Bolshevik revolution.

            Early retirement can accelerate cognitive decline.

            Defining wealth.

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