Wednesday, December 11, 2019

The Morning Call--A day without a trade reversal is like a day without sunshine

The Morning Call


The Market

The Averages (27881, 3132) edged further down yesterday.  But nothing changed with respect to the multiple gap opens or my concern that this is not healthy and could be an indication that the Market is entering or has already entered a blow off top.

Volume declined; breadth was negative. 

The VIX fell 1/8%, but it remained above its 100 DMA for a second day (now resistance; if it remains there through the close today, it will revert to support) and its 200 DMA for a second day (now resistance; if it remains there through the close on Thursday, it will revert to support).

The long bond was up one cent, but short term momentum remains down  (1) as it is still well below its 100 DMA which reverted to resistance last Friday and  (2) it continues trade in a trend of lower highs.

The latest from Jeff Gundlach

The dollar dropped 1/8%, but failed to close Friday’s gap up open.  It remained above both MA’s and in a recently reset to a short term trading range.

            More on the repo financing problem.

Gold was up ¼%, leaving both last Tuesday’s gap up open and Friday’s gap down open unfilled.

The pin action in TLT, UUP and GLD support my nervousness about stocks.
            Tuesday in the charts.



            Yesterday’s stats were mixed. The November small business optimism index was above forecasts,  Q3 nonfarm productivity fell but so did unit labor costs while month to date retail chain store sales were extremely disappointing.
            The latest estimate on Q4 GDP growth.

            Overseas, the numbers were pretty dismal.  November Chinese vehicle sales were better than anticipated but its November CPI, November Japanese YoY machine tool orders, the October UK trade deficit, GDP growth, construction output, industrial production and construction orders were below consensus.

            The trade news was upbeat.  Yesterday before the open, WSJ reported that Trump would delay the imposition of the December 15th tariffs.  Later in the day,    Trump and dems move closer to a deal on NAFTA 2.0.

            ***overnight, of course, these clowns can’t go a day without a headline reversing the prior one.

            The Donald scuttles the World Trade Organization. 

            Bottom line: it looks like, at least for the next couple of hours, that the December 15th deadline for an increase in tariffs is behind us.  Today, we get the FOMC meeting narrative.  Tomorrow, the ECB meeting and the UK election results.  And we have the endless stream of impeachment headlines.  No wonder, the uncertainty level in elevated.  On the other hand, by the end of the day, we should have renewed confirmation that NotQE is alive and well which will likely keep the bias in the Market to the upside. 

            The most bothersome factor to me right now is the misgivings expressed above in the Technical section.

    News on Stocks in Our Portfolios

EOG Resources (NYSE:EOG) declares $0.2875/share quarterly dividend, in line with previous.

Cummins (NYSE:CMI) authorized to repurchase up to $2B of common shares, upon completion of its 2018 $2B share repurchase program.


   This Week’s Data


            Month to date retail chain store sales were extremely disappointing.

            Weekly mortgage applications rose 3.8% but the more important purchase applications fell 0.4%.           

            November CPI was up 0.3% versus estimates of +0.2%; core CPI was up +0.2%, in line.


            November Japanese PPI came in at +0.2% versus consensus of +0.1%.      


            Diesel demand slumps.

            Thank you, Paul Volcker.

            The economic affects of the US/China trade war.

What I am reading today

            Michelangelo, God’s architect.

            Why your grocery bill is rising.

            Signing the human rights convention.

            A 5,000 year old idea to erase debts is coming to a town near you.

Joke of the day.

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