The Morning Call
12/5/19
The
Market
Technical
The Averages (27649,
3112) rebounded yesterday. The S&P
closed Tuesday’s gap down open; the Dow only partially so. However, both did so on a gap up open. Volume declined but breadth was only
mixed. The VIX fell 7 ¼% retracing
almost 2/3rds of the Monday/Tuesday advance. As I noted in Tuesday’s Morning Call, all
these trading gaps that have been created of late point to a trading market in
the near term. Although seasonal factors
plus the quick return of the VIX into complacency territory suggest that downside
risk is contained.
The long bond fell
1%, (1) retreating of that trend of lower highs, (2) closing back below its 100
DMA; if it remains there through the close on Friday it will revert to
resistance but (3) only partially closed Tuesday’s gap up open. All of these are short term negatives.
The dollar was down
three cents, ending below the lower boundary of its short term uptrend for a third
day, resetting it to a short term trading range.
Gold declined 1/8%,
but failed to fill Tuesday’s gap up open.
It remains below its 100 DMA.
TLT and GLD again
traded in harmony with equities. UUP’s
pin action is still somewhat confusing.
Wednesday in the
charts.
Fundamental
Headlines
Yesterday’s data
releases were slightly weighed to the negative. The final composite PMI was
better than expected; weekly mortgage/purchase applications were mixed; the
November final services PMI was in line; and the November ISM nonmanufacturing
index and the November ADP private payrolls report were disappointing.
Overseas,
the November final services and composite PMI’s came out. The only negative stats were the Japanese services
and composite PMI’s. The Chinese (Caixin),
German, EU and UK services and composite PMI’s were above expectations.
Bottom
line: nothing in the economic data provides reason to alter my forecast that
the economy is struggling to grow and will continue to do so. The erratic almost insane dueling trade
headlines are at risk of becoming just so much white noise; and in the end, my opinion
is that little will be done to address unfair Chinese industrial and IP theft
policies. Both should be weighing
heavily on broad sectors of the stock market are extremely overvalued. But they are not. NotQE.
***overnight,
Chinese reiterate that the US must lower tariffs if there is to be a Phase One
deal.
News on Stocks in Our Portfolios
Revenue of $989M (+8.7% Y/Y) beats by $16.4M.
Economics
This Week’s Data
US
The
November final services PMI came in at 51.6, in line; while the final composite
PMI was 52.0 versus 51.9.
The
November ISM nonmanufacturing index was reported at 53.9 versus estimates of
54.5.
The
November ADP private payrolls report showed an increase of 67,000 jobs versus
forecasts of up 140,000 jobs.
The October
trade deficit was $47.2 billion versus an anticipated $ 48.7 billion.
Weekly
jobless claims fell 10,000 versus expectations of a 2,000 increase.
International
October
EU retail sales fell 0.6% versus consensus of -0.3%.
Q3
EU employment rose 0.1%, in line; GDP growth was +0.2%, also in line.
The
November German construction PMI came in at 52.5 versus projections of 51.1.
Other
October
median household income.
Bond
defaults continue to rise in China.
What
I am reading today
A
further condemnation of our schools.
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