The Morning Call--A Quiet Day
The Morning Call
9/10/19
The Market
Technical
The Averages (26835, 2978) rested again, closing above both MA’s and in uptrends across all timeframes. Volume was up; and breadth improved. The only negative is that both of the indices made gap up opens last Thursday---which will have to be closed.
The VIX rose 1 ¾ %, ending below its 200 DMA for a third day (now support; if it remains there through the close today, it will revert to resistance). However, it closed back above its 100 DMA, voiding Friday’s break and the lower boundary of its August 5th trading range (inversely related to the August 5th trading range for the Averages), negating Friday’s break.
The long bond was down 1 ¾ %, finishing above both MA’s and in uptrends across all time frames. So, the chart remains strong and the trend toward lower rates remains intact. It also has last Thursday’s gap down open---which needs to be filled.
The Best and Worst Case Scenarios for Bonds from Here - A Wealth of Common Sense
Bond calendar remains near record levels.
After $74BN Weekly Record, Bond Boom Continues With Another $14 Billion In New Debt Borrowing
The dollar declined a nickel, but ended above both MA’s and in short and long term uptrends. Like TLT, there is no immediate danger of any technical breakdown. In addition, it still has last Wednesday’s gap down open---which needs to be closed.
GLD was down another 3/8 %. Nonetheless, it closed above both MA’s and in very short term and short term uptrends. There is also Thursday’s gap down open---which needs to be filled.
Russia, China Continue "Massive Substitution" Of Dollar Assets By Gold
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 have resolved their August 5th trading range to the upside, pointing to the return of upward momentum. The next resistance levels are their July all-time highs (27398, 3027). The only negative is that both indices plus TLT, UUP and GLD all experienced gap opens last week, which, in my opinion, just multiples the odds of price reversals that will close those gaps.
Monday in the charts.
Quant Carnage Wrecks Tech As Small Caps Soar On Financial Frenzy
Fundamental
Headlines
Two minor stats were released yesterday though neither was upbeat: July consumer credit rose more than anticipated and August consumer inflation expectations were up.
Update on big four economic indicators.
The Big Four Economic Indicators: August Nonfarm Employment
The national debt is now ten times tax receipts.
The National Debt Is Now More Than Ten Times Annual Tax Receipts
Overseas, Q2 Japanese GDP growth, its price index and private consumption were all in line; capital expenditures were lower than expected.
The July German trade balance was larger than estimates.
The July UK GDP growth, construction spending, industrial production and trade deficit were better than consensus.
The danger of a currency war.
US-China trade war risks becoming a currency war - with greater damage
Bottom line: aside from the above data, the day was quiet on the news front. So, nothing changes in my outlook: the economy is struggling but not declining (at least not yet); fiscal and monetary policies are primary reasons for this subpar performance; the odds of a US/China trade deal before November 2020 are directly correlated to Trump’s willingness to fold; given that environment, most stocks are grossly overvalued though there are a few that are near or in their Buy Value Ranges.
Investors growing more negative on stocks.
Despite Record Highs, Americans Haven't Been This Downbeat About Stocks Since Trump Was Elected
***overnight, comments from Xi.
China's Xi: "I Can't Believe What president Trump Says"
News on Stocks in Our Portfolios
AT&T soars after activist proposes breakup.
AT&T Stock Soars After Activist Elliott Pushes For Breakup
Economics
This Week’s Data
US
July consumer credit rose $23.3 billion versus forecasts of up $16.1 billion.
Consumer Credit Card Debt Explodes In July Despite Rates At 18-Year Highs
August consumer inflation expectations were 2.41% versus estimates of 2.65%
Month to date retail chain store sales declined.
International
August Chinese CPI came in at 0.7% versus expectations of 0.5%; PPI fell 0.8% versus -0.9%.
August Japanese machine tool orders dropped 37.1% YoY versus projections of -26.0%.
July UK unemployment was 3.8% versus forecasts of 3.9%; personal income rose 4.0% versus +3.7%.
Other
August rail carloads down 4.6%.
AAR: August Rail Carloads down 4.6% YoY, Intermodal Down 5.4% YoY
Freight shipping growth and recession probability.
Freight Shipping Growth and Recession Probability
Germany considering fiscal stimulus.
Euro Jumps As Germany Hints At Fiscal Stimulus
Update on auto loans.
Shades Of 2007: Subprime Auto Lender Verified Income On Only 3% Of Loans In Latest Bond
Johnson pushes ahead with plans to suspend Parliament.
UK Parliament To Be Suspended Monday Night
Help for those worried about funny accounting.
https://ftalphaville.ft.com/2019/09/09/1568032329000/US-equity-sleuths--rejoice-/
The costs and consequences of a higher minimum wage.
The Costs & Consequences Of $15/Hour - The Update
What I am reading today
Who was the man in the iron mask?
Who Was the Real Man in the Iron Mask?
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