The Morning Call
9/6/19
The
Market
Technical
The Averages (26728,
2976) soared yesterday, closing above their 100 DMA’s for the second day (now
resistance, if they remain there through the close today, they will revert to
support) and the upper boundaries of their August 5th trading ranges
(if they close above those boundaries today, those ranges will be voided). They also finished above their 200 DMA’s and
in uptrends across all timeframes. Volume
was up (but not by much); and breadth improved.
Assuming follow through today,
the only negative is that both of the indices made gap up opens---which will
have to be closed.
The VIX fell another 6 1/8 %, ending below its 200 DMA (now
support; if it remains there through the close next Tuesday, it will revert to
resistance). However, it closed above
its 100 DMA and above the lower boundary of its August 5th trading
range (inversely related to the August 5th trading range for the
Averages). That is another slight negative
for stocks.
The
long bond was down 1 ¾ % on heavy volume.
However, it remained above both MA’s and in uptrends across all time
frames. It also had a gap down open---which
will need to be closed.
The
dollar was up fractionally but not enough to fill Wednesday’s gap down open, It finished above both MA’s and in short and
long term uptrends.
GLD
got clocked 2 ½ % on heavy volume and created a gap down open. Nonetheless, it ended above both MA’s and in
very short term and short term uptrends.
Bottom line: long term, the Averages are in
uptrends across all timeframes; so, the assumption is that they will continue
to advance. Short term, they appear to
be resolving their August 5th trading range to the upside. If we get
the follow through today, then equities will regain some upside momentum.
The pin action of in long bond and
gold was terrible; but I am hesitant to assume that their strong performance is
because of a trade tweet (see below).
Thursday in the
charts.
Is this normal?
Fundamental
Headlines
Lots of data
yesterday and it was all over the block: the August ISM nonmanufacturing index was
the best number of the day; while August light vehicle sales were up slightly. On the other hand, the August services and
composite PMI’s were below estimates. Further,
(1) the August ADP private payroll report was a plus but weekly jobless claims
were a negative, (2) Q2 nonfarm productivity was positive but unit labor costs
were not, (3) July factory orders were
strong but ex transportation they were weak.
Finally, the
Atlanta Fed’s GDP Now report estimates real Q3 economic growth at 1.5%, down
from 1.7%.
Overseas, July
German factory orders and its August construction PMI were very disappointing;
and August UK new car sales declined but less than estimates.
The
main headline of the day was another turn in the on again/off again US/China
trade talks---now they are on again for some time in October. That said, I don’t think the odds of some agreement
that would be a plus for the US has changed one iota. In my opinion, the Chinese are staging this
event so that there will be no negative headlines during the upcoming October
communist party 70th anniversary bash. Clearly, I could be dead wrong.
***overnight, Bank
of China reduces bank reserve requirements.
The
tariff waiting game.
The US/Japan trade
agreement,
Below the
centerfold, investors are anticipating the upcoming FOMC meeting (rate cut).
WSJ ‘Fed whisperer’
suggests that the upcoming rate cut will only be 25 basis points.
Fear on negative
interest rates.
Someone else has
realized that the Fed is in a corner and there is no way out.
Bottom line: while
investors (algo’s?) were clearly thrilled with the US/China trade developments,
as I noted above, I think their optimism severely misplaced: (1) the Chinese
are just calming the waters until their anniversary party is over and (2) I can’t
imagine why the Chinese would make any concessions until after the 2020
elections [if ever]. Hence, I will not be
chasing stocks, even those that are in their Buy Value Range.
The end game (must
read):
August dividends
by the numbers.
News on Stocks in Our Portfolios
Economics
This Week’s Data
US
July factory orders
rose 1.4% versus consensus of 1.0%; ex transportation, they were up 0.3% versus
expectations of up 0.7%.
August US light vehicle
sales increased slightly from July.
The August
services PMI was reported at 50.7 versus estimates of 51.0; the composite PMI
was 50.7 versus 50.9.
The
August ISM nonmanufacturing index came in at 56.4 versus forecasts of 54.0.
August
nonfarm payrolls rose 130,000 versus projections of 158,000; the unemployment
rate was 3.7%, in line.
International
July
Japanese household spending fell 0.9% versus expectations of -1.3%; cash earnings
declined 0.3% versus +0.2%; leading economic indicators came in at 93.6 versus
93.2.
July
German industrial production was down 0.6% versus consensus of +0.3%.
Q2
EU estimated growth rate was 0.2%, in line
Other
Japanification:
the fear of global malaise is spreading.
US
seeking Tehran meeting.
More
of ‘your tax dollars at work’.
What
I am reading today
Five facts about the
earth’s climate.
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