The Morning Call
11/8/19
The
Market
Technical
The Averages (27670,
30785) spiked yesterday on higher volume and strong breadth---though this
indicator has entered overbought territory. The VIX was up 7/8%---the third
time of late that it has been up on a big up day in stocks, suggesting stocks
are not as overbought as indicated by breadth.
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.
The
case against a melt up (must read):
TLT got clocked 1
7/8 % on heavy volume, pushing below its 9/13 low and closing below its 100 DMA
for a third day, reverting to resistance.
It is also a short hair away from the lower boundary of its very short
term uptrend and only a couple of points from its 200 DMA.
The dollar was up ¼%,
maintaining its upward momentum.
Like bonds, gold was
pounded down 1 ½ %; and like bonds, on big volume. In the process, it finished below its 100 DMA
(now support; if it remains there through the close on Monday, it will revert
to resistance). Unlike bonds it is still
well above its 200 DMA and the lower boundary of it very short term uptrend.
Yesterday, the
above three indicators took a big step in confirming that they are climbing on
board with equity investors in the belief that a stronger economy is dead ahead. The only problem is that so far, the numbers
simply aren’t confirming that scenario.
Of course, Markets are forward looking; so, they apparently expect much
better data ahead.
That said, keep in
mind that this is the time of year when investors tend to look at the world
through rose colored glasses.
Thursday in the charts.
Fundamental
Headlines
There were two
minor indicators released yesterday that showed mixed results: September consumer
credit grew less than anticipated while weekly jobless claims fell more than
expected.
Where is that pesky recession?
Student and auto loans
continue to hit record highs.
Overseas, September
German industrial production was less than estimates but its October construction PMI was better.
Politics aside,
the major news item yesterday was the on again happy talk about an agreement on
a US/China Phase One trade pact. Who
knows how much substance there is to them?
As you know, my opinion is that the most likely outcome won’t have that
big an impact on the US long term secular economic growth rate anyway. Of course, I could be wrong. The Chinese could realize the error of their
ways and stop their unfair trade practices.
(yeah, right)
***overnight,
it is the US’s turn to pour cold water on
Phase One deal.
Bottom line: in the meantime, what I know for certain is that
the global central banks are pouring liquidity into the financial system; and I
know that for the last decade, that same policy has had little impact on the
global economy but a substantial effect on the securities markets. So, in my opinion, easy central bank monetary
policy will be the primary driver of
stock prices---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
September
consumer credit grew $9.5 billion versus consensus of up $15.0 billion.
International
September
Japanese cash earnings were up 0.8% versus estimates of +0.4%; household
spending was up 5.5% versus +3.8%;
leading economic indicators were 92.9 versus 92.3.
The
September German trade surplus was E21.1 billion versus expectations of E17.2
billion.
The
October Chinese trade surplus was $42.8 billion versus forecasts of $40.8 billion.
Other
What
I am reading today
The lottery ticket
mentality.
How to spend your money---according
to science.
Deep sleep gives your brain a deep
clean,
Breaking open a black hole.
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for Survival’s website (http://investingforsurvival.com/home)
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