The Morning Call
12/4/19
The
Market
Technical
The Averages (27502,
3092) took another drubbing yesterday, creating huge gap down opens and closing
below the lower boundaries of their very short term uptrends for a second day negating
those trends. Breadth deteriorated and
is rapidly working off the overbought condition. Volume rose. We now have two gap opens---one down and one
up that need to the filled, suggesting a range bound Market over the short
term. In the background, we need to remain
aware of the positive seasonal factor.
After a big gap
down open and closing below its 100 DMA on Monday, the long bond roared back
(up 2 ½%) yesterday, creating a huge gap up open and regaining its 100 DMA
negating Monday’s break.
The latest from
Jeffrey Gundlach.
The dollar was down
1/8%, ending below the lower boundary of its short term uptrend for a second
day; if it remains there through the close today, it will reset to a short term
trading range.
Gold spiked 1% on
major volume, also creating a gap up open.
While it remained in very short term and short term uptrends and above
its 200 DMA, it is continued to trade below its 100 DMA. On the other hand, it appears to have broken
the trend in lower highs.
The lousy trade
headlines only got worse yesterday; but the pin action provided some
clarity. The large up moves in TLT and
GLD are in line with the poor equity market performance. However, the dollar barely moved which hints more
at a safety trade than a bad economy. Nonetheless, clarity aside, those gap opens need
to be closed.
Tuesday in the
charts.
Fundamental
Headlines
It was a slow
day for data. In the US, there was only
one minor stat released. Month to date
retail chain sales grew much faster than in the prior week, likely a function
of Black Friday.
Overseas, the
numbers continued Monday’s positive trend. October EU PPI and the November UK
construction PMI were better than anticipated.
Most of the headlines
yesterday were on trade and were made before the Market open---which I covered
in Tuesday’s Morning Call.
Bottom line: the
pin action of the last two days is ostensively tied to the lousy trade headlines. However, as I have been discussing in the
technical section, the Market internals (stocks well overbought and the VIX
reflecting a high level of investor complacency) were set up to push prices lower. All it needed was a push from some negative development;
and that is what it got.
On
a fundamental basis, my opinion all along has been that (1) there would not likely
be any kind of trade deal before the 2020 election that would address the main
causes for the current trade spat, if then.
So, all the gnashing of teeth and renting of hair over the lack of a
trade deal to me is not the force that will take stocks down in any major way,
(2) as long as the Fed pumps liquidity into the financial system, markets will
continue to behave as they have for the last decade and until either the Fed or
the Markets figure out the destructive results of QEInfinity, it will remain
so.
***overnight, ‘an unnamed
source’ (cough, Larry Kudlow, cough) said that the US and China were close to a
trade deal. This after both Trump and
Ross said yesterday that there likely won’t be a deal before the 2020 election.
Here is another
detailed explanation on how QEInfinity has wreaked havoc on the global economy and
financial markets.
More on
valuations.
November dividends
by the numbers.
Private equity and
falling returns.
The most
depressing chart ever.
News on Stocks in Our Portfolios
Mastercard (NYSE:MA) +1.5% after-hours
after increasing its quarterly dividend to $0.40/share from $0.33/share and
authorizing the repurchase of as much as $8B of Class A common stock.
MA says the new buyback plan will take effect at the
conclusion of the current $6.5B repurchase program, which has ~$300M remaining
under its authorization.
Economics
This Week’s Data
US
Month to date
retail chain sales grew much faster than in the prior week, likely a function
of Black Friday.
Weekly mortgage
applications fell 9.2% but purchase applications were up 0.9%.
International
The
November Japanese final services PMI was 50.3 versus estimates of 50.4; the
final composite PMI was 49.8 versus 49.9.
The
November Chinese Caixin final services PMI was 53.5 versus 52.7; the final composite
PMI was 53.2 versus 51.2.
The
November German final services PMI was 51.7 versus 51.3; the final composite
PMI was 49.4 versus 49.2.
The
November EU final services PMI was 51.9 versus 51.5; the final composite PMI was
50.6 versus 50.3.
The
November UK final services PMI was 49.3 versus 48.6; the final composite PMI
was 49.3 versus 48.5.
Other
What
I am reading today
Is inequality really the
problem?
How to increase taxes on the rich.
Disrupting the health care market.
Why single payer will not necessarily
lower costs.
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for Survival’s website (http://investingforsurvival.com/home)
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