The Morning Call
12/17/19
The
Market
Technical
The Averages
(28235, 3191) rose yesterday in the afterglow of Friday’s announced Phase One
US/China agreement. The Dow
re-established a very short term uptrend, joining the S&P. That leaves both index above both MA’s and in
uptrends across all timeframes. So,
momentum is clearly to the upside, at least short term; and that is being aided
by seasonal factors.
However, nothing
changed with respect to those multiple gap up opens down below 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 was up;
breadth strong but is rapidly approaching overbought territory. The VIX fell another 4 % and is nearing the
lows established last April, July and November---now safely back in territory
indicative of complacency.
BofA market
expectations
Morgan Stanley
market expectations.
The long bond declined
7/8%, the third highly volatile reversal day in a row suggesting confusion
within the bond ranks. Further, while
its short term momentum remains down (1)
as it is still below its 100 DMA, (2) it
continues trade in a trend of lower highs and (3) is now approaching the lower
boundary of its very short term uptrend, it is developing a series of higher
lows potentially creating a pennant formation which would also be a sign of
confusion or uncertainty.
The dollar fell a
nickel, ending below its 100 DMA now resistance and moving closer to the lower
boundary of its short term trading range.
Gold was down one
cent, remaining near the upper boundary of its very short term uptrend as well
as its 100 DMA. While it remains in that
trend of lower highs, it is also developing a trend of higher lows---very
similar to the trading pattern of TLT.
The trading
pattern of the VIX and the S&P are clearly pointing at a stronger economy,
while TLT, UUP and GLD are suggesting uncertainty among its investors.
Monday in the
charts.
https://www.zerohedge.com/markets/vixtermination-short-squeeze-spark-stock-surge-bonds-yuan-decouple
Fundamental
Headlines
The December flash
PMI’s were released across the globe yesterday.
Here at home, they were upbeat as was the December housing market index.
Overseas,
they were mixed. Though YoY Chinese
fixed asset investment, industrial production and retail sales were all above
estimates.
As you might
expect, the US/China trade deal announced on Friday was one of the major
macroeconomic headlines of the day. As
you also might expect, everyone had an
opinion. I started to list a number of
both pro and con positions. I had linked
to eight articles before I read the below.
But once I did, I scrapped them all.
This by far the best and most thorough discussion of Phase One that I
have seen thus far.
The other story that bears watching is the Fed/repo
liquidity problem. I noted yesterday
that the first test was occurring. So
far, the result has been passable. Here
is some more insight.
Bottom line: it would
appear that volatile US/China trade headlines will probably return soon enough,
which will likely have some spillover effect on stock prices. That said, with the Fed pumping oodles and
oodles of money into the financial system, the impact on the Market should be a
plus, at least initially.
I
would be sure to use the current Market strength to build cash reserves. If you have already done that, enjoy.
News on Stocks in Our Portfolios
Economics
This Week’s Data
US
The
December flash manufacturing PMI came in at 52.5, in line, the services PMI was
52.2 versus 51.9, the composite PMI was 52.2 versus 51.9.
The
December housing market index was reported at 76 versus expectations of 70.
Month
to date retail chain store sales declined at a faster rate than in the prior
week.
November
housing starts rose 3.1% versus consensus of up 1.6%; building permits were up
1.4% versus -4.1%
International
October
UK unemployment stood at 3.8% versus estimates of 3.9%.
The
October EU trade surplus was E28 billion versus projections of E17 billion.
Other
The problem with deficits.
***overnight, Johnson says no
more Brexit delays.
https://www.zerohedge.com/markets/pound-tumbles-report-pm-johnson-plans-outlaw-further-brexit-delays
Bulk shipping rates continue to
plunge.
What
I am reading today
Time magazine’s top 100
photos of 2019
More on the Afghan papers.
Quote of the day.
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