Monday, November 2, 2020

Monday Morning Chartology


The Morning Call




The Market




The S&P’s chart has not changed much from the one that I presented last Thursday.  The key technical points remain (1) its last high was lower than its all-time high, creating the potential that a double top has been made, (2) it is challenging its 100 DMA [now support; if it remains there through the close on Tuesday, it will revert to resistance].  It originally challenged this DMA last Wednesday, then traded back to the line on Thursday (negating the challenge), then again closed below it on Friday.  However, (1) it opened a huge gap down on Wednesday, which needs to be filled and (2) while it has made a lower high, it has yet to make a lower low.  So (1) very short term, the S&P is in a trading range and (2) until it breaks more support levels, I will continue to believe its long term bias is to the upside as long as the QEInfinity/Forever is the operative monetary policy.


This is a 10 year look at the long bond.  As you can see, it has developed a series of lower highs and lower lows; so, near term the trend is lower.  That seems counterintuitive in the midst of uncertainty regarding the economy, the election and the coronavirus.  But it is what it is; and until proven otherwise the short term trend in prices (rates) is down (up).  That said, TLT is in uptrends across all timeframes; hence, it can decline further before challenging even its very short term uptrend.   Bottom line, getting too beared up on bond prices is premature.



                Here is another 10 year chart; this one for gold.  Like TLT, it is in uptrends across all timeframes.  But this chart looks very different.  Indeed, one could make a decent argument that GLD has reached a cycle peak.  Though, it is hard to put heavy odds on that until it at least pushes below its nearest support levels (100/200 DMA).  Nonetheless, I would refrain from any buying until or if GLD it successfully challenges its former high.


                I might as well keep this whole 10 year chart thing going.  This for the dollar.  As you can see, it is near the lower boundary of its intermediate term uptrend---where it recently bounced off of that trend as well as the lower boundary of its short term trading range and reset its very short term trend from down to a trading range.  That suggests that UUP has seen a low and further upside is coming.


            A strong dollar, higher bond prices and weak gold prices would make sense in a faltering economy.


                Friday in the charts.







              The Economy


                        Last Two Weeks in Review


The economic data in the week of October 19th was a bit sparse, but it was upbeat including one primary indicator.  This past week, the numbers were mixed including the primary indicators (three positive, three negative).  So, the stats continue to discount any notion of a ‘V’ shaped recovery.  And in fact, the Street talk has gone from ‘K’ shaped consensus (i.e. part of the economy performing well while the rest dismally) to a ‘W’ formation---meaning a short recovery (which we have already had) and then another period of economic weakness.


Overseas, the indicators in both weeks were basically mixed.  Of course, the narrative on the coronavirus has turned quite negative in Europe, suggesting renewed lockdowns---most likely accompanied by a decline in economic activity.  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.






The October German manufacturing PMI came in at 58.2 versus                                                            expectations of 58.0; the EU manufacturing PMI was 54.8 versus 54.4; the UK manufacturing PMI was 53.7 versus 53.3.




                          September real disposable income.



            The Fed


              Does anyone trust the Fed?





              US/China militaries hold talks.




                Bottom line.  How stock market bubbles form.



              Bracing for a contested election.



              The fine line between persistence and insanity.




    News on Stocks in Our Portfolios


Illinois Tool Works (NYSE:ITW) declares $1.14/share quarterly dividend, in line with previous.


What I am reading today


            Water ice on the moon may be easier to reach than we thought.



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