New Record Highs Again

I update each Saturday with my view of the stock market for the next few weeks (if occupied with family or travel, rarely I am a day or two late, just check back).  The monthly “Long Term” update will be on a Wednesday soon after the 15th of each month, and this supports investors who want to buy and hold, but want to sell to avoid the bulk of a primary bear market, and buy back in for most of the next bull market.  You can always scroll down a few weeks and find the latest “Long Term” update.

If you lose your bookmark to the blog, google “Rich Investing” and it should show up on the first page or so.  The more often you google it and hit the link, the higher it will show in your results.

Economy:

Durable goods orders for Sept. fell a revised 1.2%.  The ISM non-manufacturing index rose to 54.7% last month from a 52.6% reading in September that was the weakest in three years.  The four week average of new jobless claims rose a scant 250 to 215,250, a generally low number.  The U. of Michigan preliminary consumer sentiment survey rose slightly to 95.7 this month from 95.5 in October.

The economy remains sluggish.

Geo-Political:

The US and China trade negotiators continue to talk, but any major progress seems far away.  Trump would like a political win going into his impeachment, and the Chinese economy is hurting, so both sides have an incentive to sign a deal, even if it only symbolic.  On the other hand, if China thinks Trump is more anti-China than his possible successors if he loses the election, they could see how little Trump will demand of them in a “phase 1 deal” in order to get some win, any win, and take what they can get now without giving up anything of substance.  What they will probably not do is anything that would help Trump get re-elected, and that means they will not be willing to give up anything of substance.

From Europe, things are still sluggish:

November 8, 2019 (Reuters) – The European Central Bank is determined to maintain its present monetary policy until conditions improve, ECB governing council member Bostjan Vasle told a banking conference on Friday.

He said the ECB believes interest rates should remain low for a “longer period”, adding that ECB policy was aimed at influencing short-term and long-term interest rates.

“We are aware that the room for adopting further instruments is probably reducing and could lead to conditions when the effectiveness of instruments will be even smaller while their negative effects will be getting bigger,” Vasle said.

Consequently, euro zone states need to accompany ECB monetary policy with structural and fiscal reforms that will promote economic growth, raise productivity and address challenges of the ageing population, he said.

Global risks and uncertainties are rising, mainly because of trade disputes, uncertainties regarding Brexit and slowing economic growth in China, he said.

The key factors that are slowing down growth and increasing uncertainty are coming from the economic policy-makers … and are not a result of internal imbalances,” Vasle said.

He urged banks to lend more to companies but warned that ample liquidity of banks could lead them into riskier investments that might threaten financial stability.

https://uk.reuters.com/article/uk-ecb-policy-vasle/ecb-will-continue-current-policy-until-conditions-improve-vasle-says-idUKKBN1XI101

Technical Analysis:

The market continued its slow climb, closing the week up .6% to an all-time closing high of 3093.

It was time to refresh the chart.

Technically, the chart looks good, but it is looking extended now.  RSI at the top of the chart has moved up to overbought at 70.  In a bull market, when it gets overbought, it can get more overbought.  The rules reverse and in a bear market when it gets oversold, it can get more oversold; clearly something we are not concerned with right now, just information for future reference.  But as I have mentioned, in the last year when the market has gotten overbought, it has not remained there very long before correction has set in.  Now, the market can do anything, it could act like a young bull and keep powering up, but I think the odds are against it with the milk toast earnings season.  Momentum shown by MACD at the bottom of the chart is rising steadily, a good sign for the short term, but it is also up at levels where it has rolled over in the past year.  The price action is clearly positive with constant upward action.

Everything looks good, but it begs the question when the next correction will happen.  We’re in territory where caution is indicated, and as I mentioned last week, I already began selling into this strength.

2019 11 09

Click THIS LINK to open the chart in a separate window.

What am I doing?  Last week I didn’t trade.  I took a little vacation out to Marfa in west Texas and toured the Davis Mountains State Park, Fort Davis National Historic Site, McDonald Observatory, and took a couple of short hikes on the drive down south to Presidio.  We thought Marfa was the jewel of the west Texas swing and enjoyed the dining there.  The Davis Mountains Nut Company has very good pecans coated a variety of ways, and they ship.  The holidays are coming!

I sold my index ETF a couple of weeks ago, but I still have my individual stocks.  I had sold covered calls against them and they all expire in one week.  Some will be called, meaning my profit was capped by the call strike price, but I am happy to see them fetch the price I agreed to sell at.  I will keep most of the stocks and evaluate whether to sell them or sell another covered call at a higher strike price.

If you enjoy these updates, please tell your friends and family who are interested in the stock market about this blog.

Your comments and questions are always appreciated, so feel free to comment using the “Leave a Comment” feature just under the title of the post, or send me an email, my address is on the “About” page at the top of the blog.

You can use the hyperlink below the chart of the S&P that will open a larger picture of the chart in a separate window.  The reader who suggested this wants to look at the chart side-by-side with the blog text so he can look at the chart while reading the text.  To do this in Firefox you can open a “private window” from the browser menu and have two instances of Firefox up, then size each window to about half of your monitor size.  If you bookmark the link to the chart you can look at it each day of the week to see how the market is progressing to certain milestones.  The picture in this post is a static .jpg so it does not update, but if you bookmark the link to the live chart on stockcharts and look at that daily, it does update.

Rich Comeau, Rich Investing

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