Tuesday, November 10, 2020

The Morning Call--Don't get too excited

The Morning Call




The Market




            The S&P (the Dow followed the same pattern) blasted higher on big volume; and in the process (1) created its third gap up open in the last week---all of which need to be filled and (2) challenged its all-time high on an intraday basis but failed to hold above it.  As positive as the fundamental news is, this is not good technical action made worse by nosebleed valuations.  Short term, I would be very careful here.  If you want to participate, I would wait for a successful challenge of its all-time high.  Longer term, QE is still the overriding consideration as long as the Market’s believes.



                Don’t get too excited.




                Prior to yesterday, it appeared that the long bond was headed lower (rates higher) and the yesterday’s price decline only exacerbated the move down.  It is now poised to challenge the lower boundary of its short term uptrend.  If successful, it would be the first negative technical even in almost two and a half years.  To be clear, TLT would have to decline over 20% to present a serious challenge to the bull market.  But then, 20% downside represents considerable hurt.


                Since early September, gold has been in a trading range defined by its all-time high (horizontal black line at top of the chart) and its September low.  In that time, it was able to negate a trend of lower highs, reset its 100 DMA from resistance to support and appeared to be preparing for another challenge of its all-time high.  Yesterday’s price action reversed all that but (1) it created a huge gap down open that will need to be filled and (2) held above the lower boundary of the aforementioned trading range. Follow through.


            Unlike all the above, the dollar did not create a gap open though it had done so last week.  It did bounce off the lower boundaries of its very short term and short term trading ranges, leaving it within both ranges and, therefore short term, technically directionless.


            The VIX continued to reflect a high level of investor uncertainty, actually closing up on a mega up day in stocks.  That is not an encouraging sign of investor sentiment.


            Bottom line.  The S&P is in danger of creating a triple top, the long bond is threatening to go lower (higher rates)---not a plus for stocks, the VIX is reflecting a high investor concern.  So, take a deep breath and be sure the Market commits itself directionally before taking any action.






              The Economy



                         The October small  business optimism index came in at 104.0 versus expectations of 102.2.




September UK unemployment was 4.8%, in line; average earnings were up 1.3% versus +1.0%.


October Chinese CPI was -0.3% versus estimates of +0.2%.


November EU economic sentiment was reported at 32.8 versus predictions of 36.0; German economic sentiment was 39.0 versus 41.1.




                          Update on big four economic indicators.



                                                  Update on seven high frequency indicators.



                                                  Germany considering delaying $4 billion in tariffs on US goods.



 Leading index for commercial real estate fell in October.







            The Fed


              Rescues are ruining capitalism.



            Bottom line.


              The failure of ungrounded investment narratives.



    News on Stocks in Our Portfolios


            General Mills (NYSE:GIS) declares $0.51/share quarterly dividend, in line with previous.


What I am reading today


            What a Biden presidency would mean for retirees.



            Managing your insurance products.




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