The Morning Call
The Averages (27110, 3005) basically marched in place yesterday, closing up fractionally. Volume was down (as usual) and breadth was mixed. They finished above both MA’s and in uptrends across all timeframes. So, the assumption is that they will continue to move to the upside---the next major level to be challenged being their all-time highs (27398, 3027). As a reminder, the gap up opens from thirteen days ago still have to be closed.
The VIX was down 1 ½ %, ending below both MA’s (now resistance), I continue to watch this indicator for any deviation from its (inverse) symmetry with the Averages as a sign of a Market reversal.
The long bond rose ½ and is now challenging the downward trajectory of its price trend since the recent sharp decline began. It remains above both MA’s and in uptrends across all timeframes. So, the long term trend in rates remains to the downside. And that gap down open thirteen days ago still needs to be filled.
The dollar declined ½% but remains above both MA’s and in short and long term uptrends. However, investors seem unphased by the growing global dollar shortage problem.
The risk of a liquidity driven event is increasing (must read):
GLD was up 1/8 %, closing above both MA’s, in very short term and short term uptrends and the minor support level that I have been watching since last Friday. It still needs to fill the gap down open from thirteen days ago.
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 regained upward momentum. I remain concerned about gap opens, increased volatility and low liquidity in other indices and individual stocks.
Tuesday in the charts.
Yesterday’s economic releases were largely positive. While growth in month to date retail sales slowed, August industrial production, capacity utilization and the September housing index were better than anticipated.
Overseas, the September EU and German economic sentiment indices were above expectations.
Two items that I focused on yesterday:
- the economics of oil, given Sunday’s attack on the Saudi production facilities. Concern eased as oil prices plunge on reports that Saudi output will normalize in two to three weeks. That is a clear positive in that the disruption in global supply will be temporary, IF nothing else occurs. I said yesterday that I can’t believe that some sort of retaliation isn’t in the offing. Likely, the current radio silence means that any response will be measured. But we won’t know until it happens.
Saudi’s say they have evidence that the attacks originated in Iran.
- the current FOMC meeting which will end today---at which time we will get any policy moves [lower rates, more QE] and the narrative justifying those moves. Current consensus is that it will lower the Fed Funds rate by 25 basis points.
I have long argued that the irresponsibly accommodative central bank monetary policy over the last decade has had a deleterious impact on economic growth. Now a study showing the negative effects on economic growth of lower and lower interest rates. Are you listening Jerome?
Bottom line: as you know, I believe that easy money, lower rates and QE (except QEI) have been a burden on the economy. That is not apt to change. So, the continuation of those policies will only increase that burden---which is not a plus for the economy or corporate profits.
Mean reversion ahead.
Handling risk in the late stages of a bull market.
Bill Gates on oil companies/stocks.
The latest from Jeff Gundlach."The Greatest Economy (N)Ever": Gundlach's Full Webcast Slides
News on Stocks in Our Portfolios
Mastercard (NYSE:MA) declares $0.33/share quarterly dividend, in line with previous.
General Mills (NYSE:GIS): Q1 Non-GAAP EPS of $0.79 beats by $0.02; GAAP EPS of $0.85 beats by $0.08.
Revenue of $4B (-2.2% Y/Y) misses by $80M.
This Week’s Data
Growth in month to date retail sales slowed last week.
August industrial production rose 0.6% versus estimates of +0.2%; capacity utilization was 77.9% versus 77.6%.
Update on big four economic indicators.
The September housing index came in at 68 versus forecasts of 66.
Weekly mortgage applications fell 1.0% but purchase applications rose 6.4%.
August housing starts were up 12.3% versus consensus of up 4.5%; building permits were up 7.7% versus -3.0%.
The August Japanese trade balance was -Y136.3 billion versus expectations of -Y355.9 billion.
August UK CPI was up 1.7% versus projections of +1.9%; core CPI was +1.5% versus +1.8%; PPI was -0.8% versus -0.5%; core PPI was +2.0%, in line.
August EU CPI was +1.0%, in line; core CPI was +0.9%, also in line. July construction output rose 1.1% versus 1.0%.
Bitcoin is a hedge against fiscal irresponsibility.
EU’s growing trade deficit with China.
Global auto sales to decline 2-3% this year.
What I am reading today
Irish teen invents magnetic fluid trap that remove microplastics from water.
Happy Constitution Day.
When is enough enough?
A simple trick that will help you invest better.
Almost everywhere, fewer children are dying.
Russia will be the first country to deploy hypersonic missiles on submarines.
Solidarity, the union that won Poland.
There are no old brave people in finance.
Visit Investing for Survival’s website (Home | Investing for Survival | Investingforsurvival.com) to learn more about our Investment Strategy, Prices Disciplines and Subscriber Service.
Analyst's Disclosure: I am/we are long gis, MA.
Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.