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The Morning Call--Nothing Ever Changes

|Includes: Automatic Data Processing, Inc. (ADP), BDX, QCOM

The Morning Call


The Market



The indices (DJIA 23435, S&P 2579) had a roller coaster day, ending modestly higher (the relentless drive higher).  Volume was down, but still high; breadth was mixed but remains at a positive level.  Both remain above their 100 and 200 day moving averages and are in uptrends across all time frames. 

The VIX (10.2) was up slightly---finishing below the upper boundary of its short term downtrend, below 100 day moving average (now resistance), below its 200 day moving average (now resistance), but  above the lower boundary of its long term trading range and continues to develop a very short term uptrend.  There is a narrowing gap between these multiple resistance/support forces.  How it gets resolved will likely be a longer term directional signal.

The long Treasury up, ending above its 200 day moving average (now support), above the lower boundaries of its short term trading range and long term uptrend, right on the upper boundary of its very short term downtrend but below its 100 day moving average (now resistance).  It is very close to a trend change.

The dollar rose, ending below 200 day moving average (now resistance), very close the upper boundary of its short term downtrend and above its 100 day moving average  (now  support) and continues to develop a very short term uptrend.  Again, a trend change could be at hand.

GLD increased, finishing right on its 100 day moving average (now resistance), above its 200 day moving average (support) and the lower boundary of a short term uptrend.  Again, potential trend change.

 Bottom line: long term, the indices remain strong viz a viz their moving averages and uptrends across all timeframes. Short term, they are above the resistance level marked by their August highs, meaning that there is no resistance between current price levels and the upper boundaries of the Averages long term uptrends.  Despite some recent churn, the technical assumption has to be that stocks are going higher.

            Market's Best Three-Month Span is November to January

Trading in UUP, GLD and TLT were again out of sync with themselves and stocks, but seem to be pointing at a change in trends.

I remain uncomfortable with the overall technical picture.





            Lots of data yesterday, mostly positive but with a few caveats:  weekly mortgage and purchase applications and the October ISM manufacturing index were negative; the October manufacturing PMI and October light vehicle sales were positive; the September (better than expected)/revised (down big) August construction spending and the October (improved)/revised September (down big) ADP private payroll reports were mixed.  Much of the confusion in the latter two numbers is attributable to the impact of hurricane season on the bean counters.  I have to assume that this part of a trend---meaning the numbers have a bit less credibility than usual.


            Overseas, the October Chinese Caixin manufacturing PMI was reported in line with consensus; the October UK manufacturing PMI was above estimates.

            ***overnight, the October EU manufacturing PMI was better than anticipated; October German unemployment declined.

            On the fiscal side, the GOP delayed the presentation of its tax reform bill (cough, cough).


            ***overnight, the latest rumor is that the corporate tax cut will be temporary (medium)

            Futures Slide On Report Corporate Tax Cuts To Be Temporary, Phase Out After A Decade


            Monetary policy was where the headlines were created:


            The Wall Street Journal reported that Trump has selected Jerome Powell to be Fed chairman when Yellen departs.  As I noted in Monday’s Morning Call, he seemed the most likely candidate since he is an easy money man (i.e. dove) and Trump hardly wants anyone heading the Fed that would get aggressive shutting down QE since (1) it would likely have a negative impact on the stock market---whose advance in the last year the Donald has attributed to himself and (2) Trump made his money using lots of debt---the higher the cost of debt, the less he will like it.

            Trump Picks Powell To Be Next Fed Chair, USDJPY Slides

                A little history on policy expectations for past new Fed heads and then what happened (medium):

            Knowing The Policy Stance Of An Incoming Fed Chairman, How It Paid To Do The Opposite

                The FOMC released its statement following the November meeting.  There was not much newsworthy in the sense of surprises.  The narrative did sound just a tad more hawkish as it said that the Fed (1) expects inflation to stabilize, (2) thinks the near term economic risk to the economy are balanced and (3) expects the economy to grow in a manner that would warrant a gradual increase in the Fed Funds rate.  As a reflection of Market action, the ‘odds’ of a December rate hike remained unchanged at 87%.  That said, as I noted above, enough people in the bond pits think that the economy is not strengthening and long rates aren’t going up to push the long bond toward re-establishing an uptrend.

                FOMC Statement: No Change to Policy

                Bottom line: despite the potential for real change, it appears that it is business as usual: (1) unwinding QE at a snail’s pace, (2) with a new Fed chair that is just as dovish as Yellen and (3) after eight years of promising fiscal reform, the GOP still groping around like a bear cub with his first hard on.

            And yet, everything is awesome.

                Warren Buffett's favorite market metric suggests investors are 'playing with fire'

            The latest from Doug Kass (medium):

            A Long Time Ago, In a Market and Galaxy Far, Far Away | RealClearMarkets

       Investing for Survival


            Five cognitive biases the hurt investors the most.

            These Five Cognitive Biases Hurt Investors The Most


    News on Stocks in Our Portfolios

Qualcomm (NASDAQ:QCOM): Q4 EPS of $0.92 beats by $0.11.

Revenue of $5.9B (-4.4% Y/Y) beats by $100M.

Automatic Data Processing (NASDAQ:ADP): Q1 EPS of $0.91 beats by $0.06.

Revenue of $3.08B (+5.5% Y/Y) beats by $20M.

Becton, Dickinson (NYSE:BDX): Q3 EPS of $2.40 beats by $0.03.

Revenue of $3.17B (-1.9% Y/Y) beats by $20M.


   This Week’s Data

            The October manufacturing PMI came in at 54.6 versus expectations of 54.5.

            The October ISM manufacturing index was 58.7 versus estimates of 59.5.

            September construction spending was up 0.3% versus consensus of 0.0%; but the August number was revised from +0.5% to +0.1%,

            October light vehicle sales were 18.1 million units versus forecasts of 17.5 million units.

            Hurricane Surge Fades: October Auto Sales Mixed As GM Inventory Starts To Tick Back Up


            Weekly jobless claims fell 5,000 versus an anticipated decline of 2,000.

            Third quarter nonfarm productivity increased by 3.0% versus expectations of +2.5%; unit labor costs were up 0.5% versus estimates of up 0.6%.



            China’s ‘ghost collateral’ (medium):

            Hurricane Surge Fades: October Auto Sales Mixed As GM Inventory Starts To Tick Back Up



What a fine ruling class we have.

Presented with no comment (medium):

"He's F**ked": Trump Blames Kushner For Mueller Probe As West Wing "Fears Impeachment", VF Reports

Also with no comment (medium):

"A Shocking Truth": Donna Brazille Accuses Clinton Campaign Of "Rigging" Primary

Limiting the executive branch’s ability to start a war (medium):

US Administration Defends Its Right To Start Wars On A Whim

  International War Against Radical Islam

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Disclosure: I am/we are long adp,bdx,qcom.