The Morning Call--Fed Day
The Morning Call
9/18/19
The Market
Technical
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.
Investors Are The Most Apocalyptic Since August 2009, Completely Ignoring Last Week's Quant Crash
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.
https://ftalphaville.ft.com/2019/09/17/1568722701000/Lookout--there-s-a-dollar-crunch-/
More.
$53.2 Billion In QE Lite: Fed Concludes First Repo In A Decade Amid Liquidity Panic
And more.
Did The Fed Fail: Repo Rate Refuses To Drop
The risk of a liquidity driven event is increasing (must read):
The Risk Of A Liquidity-Driven Event Is Rising
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.
Will The Recent Rally In Value Stocks Last?
Tuesday in the charts.
Today's "Watershed" Repo-calypse Is "One Of The Worst Things That Can Happen"
Fundamental
Headlines
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.
Oil Prices Plunge On Reports Saudi Output Levels Normalized With 2-3 Weeks
Saudi’s say they have evidence that the attacks originated in Iran.
Saudi Arabia Says It Has "Material Evidence" Tying Iran To Aramco Attack
- 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?
Could Ultra-Low Interest Rates Be Contractionary?
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.
The Bezzle and the Central Banks
Bill Gates on oil companies/stocks.
Divesting From Oil Companies Does 'Nothing' To Save The Climate, Bill Gates Says
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.
Economics
This Week’s Data
US
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%.
Industrial Production Increased in August
Update on big four economic indicators.
The Big Four Economic Indicators: Industrial Production Up in August
The September housing index came in at 68 versus forecasts of 66.
NAHB: "Builder Confidence Hits Yearly High in September "
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%.
International
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%.
Other
Bitcoin is a hedge against fiscal irresponsibility.
Bitcoin Is A Hedge Against Gov't "Fiscal Irresponsibility", Analyst
EU’s growing trade deficit with China.
EU's Growing Trade Deficit With China Bodes Poorly For The Future
Global auto sales to decline 2-3% this year.
S&P Says Global Auto Sales To Fall 2-3% This Year
What I am reading today
Irish teen invents magnetic fluid trap that remove microplastics from water.
Irish Teenager Invents Magnetic Liquid Trap That Can Remove 90% of Microplastics From Water
Happy Constitution Day.
When is enough enough?
Fat, Happy, And In Over Your Head
A simple trick that will help you invest better.
One Simple Trick That Will Help You Invest Better
Almost everywhere, fewer children are dying.
Almost Everywhere, Fewer Children Are Dying
Russia will be the first country to deploy hypersonic missiles on submarines.
Russia Will Be The First To Deploy Hypersonic Missiles On Submarines
Solidarity, the union that won Poland.
Solidarity - the union that won Poland - Adam Smith Institute
There are no old brave people in finance.
Why There Are No Brave Old People In Finance
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Analyst's Disclosure: I am/we are long gis, MA.
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