The Morning Call
11/7/19
The
Market
Technical
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.
Fundamental
Headlines
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
Economics
This Week’s Data
US
Weekly
jobless claims fell 8,000 versus forecasts of down 4,000.
International
September German
industrial production fell 0.6% versus estimates of -0.4%; the October
construction PMI was 51.5 versus 50.5.
Other
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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for Survival’s website (http://investingforsurvival.com/home)
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