The Morning Call--Much Ado About Nothing
The Morning Call
9/25/19
The Market
Technical
The Averages (26807, 2966) fell yesterday on significantly higher volume (not a positive sign) and deteriorating breadth. The S&P ended just above the upper boundary of the September 4th gap up open. Though the Dow is still a distance away.
The VIX soared 14 3/8%, closing above both MA’s (now resistance); if it remains above its 100 DMA through the close on Thursday, it will revert to support; if it remains above its 200 DMA through the close of Friday, it will revert to support. This is not a plus for equities.
The indices remain above both MA’s and in uptrends across all time-frames. So, my assumption is that the momentum remains to the upside. However, the odds of them closing those 9/4 gap up opens is high and rising. That said, as I noted previously, those gap up opens needed to close to eliminate them as a technical negative to a further advance in stock prices---in other words, closing them would be a potential positive.
Gold was up ½% and the long bond 1 ¼% so the need for safety appears to be growing. On the other hand, the dollar is backing and filling which is not really reinforcing the pin action in GLD and TLT.
Tuesday in the charts.
Stocks Slammed On Sentiment Slump, Trade Turmoil, & Impeachment Anxiety
Fundamental
Headlines
Yesterday’s stats were mixed: the September manufacturing and composite PMI’s and the September Richmond Fed manufacturing index were better than anticipated while month to date retail chain store sales, the July Case Shiller home price index , the September services PMI and the September consumer confidence index were below expectations.
Overseas, the July Japanese leading economic indicators, the September services and composite PMI’s were above estimates while the manufacturing PMI was below.
The Latest Numbers Tell Us That The Global Economic Slowdown Is Accelerating Dramatically
Other headlines impacting the Market:
- Middle East. This situation is not cooling off.
US accuses Iran proxies of attack on US Baghdad compound.
Iran Proxies Escalating? Overnight Rocket Attack Hits US Embassy Compound In Baghdad
UK, Germany and France agree Iran responsible for Saudi attack.
UK, France, Germany Say It's "Clear" Iran Attacked Saudis; Johnson Backs New 'Trump Deal'
- trade. In UN speech, Trumps hammers China’s trade practices.
S&P Falls Back Below 3,000; Gold Spikes As Trump Taunts China At UN
But China makes another ‘goodwill’ gesture, preparing to increase US pork imports [it forgot to mention that the swine flu has devastated its pork producers and it needs to keep its population fed].
- impeachment. Pelosi announced an impeachment inquiry. I try to avoid politics; but this could have an impact on the Market. Two observations: [a] an inquiry is not an impeachment proceeding and [b] it is the Senate that votes on impeachment. The dems would need approximately 20 GOP senators to impeach Trump. Unless Trump was demanding the Ukrainian president to send over his favorite goat in order to get US aid, my guess is that the odds of impeachment are slim to none. Indeed, if this whistleblower affair turns out like every other dem attempt to discredit and impeach Trump, it could prove a plus for him and his re-election prospects
The latest.
And.
Pelosi To Announce Formal Impeachment Enquiry Despite Trump Release Of Ukraine Transcript
Bottom line: as volatile as yesterday’s headlines appear, I don’t see anything that would permanently damage investor psychology. Ultimately, any mean reversion in equity valuation will be, in my opinion, a function of investor recognition of the disaster that is Fed money policy.
"It May Already Be Too Late For Europe's Economy..."
Insider selling hits 20 year high.
Insider Selling Hits 20 Year High As Stock Buybacks Soar
Blackstone CEO warns of asset bubble.
"That's The Greatest Risk" - Head Of World's Largest PE Firm Warns Of "Asset Bubble Reckoning"
News on Stocks in Our Portfolios
General Mills (NYSE:GIS) declares $0.49/share quarterly dividend, in line with previous.
Nike (NYSE:NKE): Q1 GAAP EPS of $0.86 beats by $0.15.
Revenue of $10.66B (+7.1% Y/Y) beats by $230M.
Economics
This Week’s Data
US
Month to date retail chain store sales grew slower than in the prior week.
The July Case Shiller home price index was up 0.1% versus estimates of up 0.3%.
The September Richmond Fed manufacturing index came in at -9 versus consensus of -11.
The September consumer confidence index was reported at 125.1 versus forecasts of 133.5.
Americans' Confidence "Expectations" Tumble To 2019 Lows
International
Other
What I am reading today
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Analyst's Disclosure: I am/we are long gis, nke.
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