The Morning Call
10/19/20
The
Market
Technical
On Thursday, the
S&P broke the short term trend of higher lows to the downside. While it recovered on Friday, it was not
enough to recapture the trend. That sets
up the potential of having made a high that is lower than its early September
high and creating a double top. It is
way too soon to make that call but, as I said, the potential now exists. Stay tuned.
Recall
that in late September, the long bond broke out of a pennant formation to the
upside---a technical signal of a further move up. Well, just to show technical rules are not
cast in stone, TLT almost immediately made a big move down resetting the trend
of lower highs---a sign of lower prices (higher yields). The key now is whether TLT can hold above its
200 DMA (wiggly blue line). If so, any
move to higher rates will be limited. If
not, it would be a sign of mounting investor concern about inflation, safety or
both.
Gold
continues to struggle for direction. I
thought that the gap up open/break of the trend of lower highs that occurred
Friday before last was a harbinger of an upside break in price. But there was no follow through and GLD sold
off; although it didn’t violate a trend of higher lows. Now it is right on the point of a pennant
formation. The technical rule is that any
move from the point is an indication of further follow through in direction of
that move. Stay tuned.
In
late September, the dollar broke to the upside out of a short term downtrend. While my hope was that it would continue to
recover, after a short rally, it resumed its downward trajectory making a new
series of lower highs. It still has the
lower boundaries of both its short term trading range and intermediate term
uptrend as support. But it seems likely that
it at least will make a second attempt to challenge the lower boundary of its
short term trading range. Stay tuned.
It
seems that ‘stay tuned’ remains the current technical theme. When the major indicators are all signaling
that in unison, historically the best strategy is to do nothing.
Friday in the charts.
https://www.zerohedge.com/markets/vix-stocks-rise-week-banks-puke-ahead-black-monday-anniversary
Fundamental
Headlines
The
Economy
Last Week in Review
Last week was
another slow one for statistical releases in the US. What we got was basically mixed. The fact that the data remains mixed, however
skimpy, fits with the current pattern of economic improvement but not in the ‘V’
shape that is hoped for.
Overseas, the
indicators were also sparce and mixed---not much informational value there. So, after two very positive weeks of results,
global stats are back to a mixed to negative bias. Not helpful to our own recovery.
Whatever the
shape or magnitude of the near term bounce back, I am not altering my belief
that long term the economy will grow at a historically subpar secular rate due
to the twin burdens of egregiously irresponsible fiscal and monetary
policies---which, by the way, are becoming even more egregiously irresponsible
as a result of measures being taken by the government and the Fed in dealing
with the current crisis.
US
International
The
September Japanese trade balance was Y675 billion versus projections of Y989.8
billion.
Q3
Chinese YoY GDP growth was 4.9% versus estimates of 5.2%; industrial production
was up 6.9% versus 5.8%; retail sales rose 3.3% versus 1.8%.
Other
Update on big four economic indicators.
Commercial construction backlog falls in
September.
https://www.zerohedge.com/economics/after-brief-uptick-commercial-construction-backlog-falls-again
World
Bank economist says financial crisis could emerge from pandemic.
The Fed
All that is wrong with the US financial
system.
Fiscal
Policy
2020 budget deficit triples to $3 trillion.
China
UK spy chief warns of Chinese covert activities.
Bottom line.
Growth versus value post-election.
http://www.capitalspectator.com/will-value-stocks-overtake-growth-shares-after-the-election/
News on Stocks in Our Portfolios
V.F.
Corp (NYSE:VFC): FQ2
Non-GAAP EPS of $0.67 beats by $0.19; GAAP EPS of $0.62 beats
by $0.15.
Revenue
of $2.61B (-17.9% Y/Y) beats by $70M.
V.F. Corp. (NYSE:VFC) declares $0.49/share
quarterly dividend, 2.1% increase from prior dividend of $0.48.
Paychex (NASDAQ:PAYX) declares $0.62/share
quarterly dividend, in line with previous.
What
I am reading today
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