Thursday, December 5, 2019

The Morning Call--Insane dueling trade headlines

The Morning Call


The Market

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.



            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
Microsoft (NASDAQ:MSFT) declares $0.51/share quarterly dividend, in line with previous.
General Dynamics (NYSE:GD) declares $1.02/share quarterly dividend, in line with previous.
Brown-Forman (NYSE:BF.B): Q2 GAAP EPS of $0.59 beats by $0.07.
Revenue of $989M (+8.7% Y/Y) beats by $16.4M.


   This Week’s Data


            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.


            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.


            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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