Market Melts Up

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.

The monthly Long Term update will be posted Wed. 11/20.

Economy:

The consumer price index jumped 0.4% in October, with energy accounting for more than half the increase, while the increase in the cost of living over the past 12 months edged up 1.8%.  The four week  average of new jobless claims rose by 1,750 to 217,000, a generally low number.  Retail sales increased 0.3% in October.

The US economy is just perking along, not too hot or too cold.

Geo-Political:

A few quick hitters:

Brexit:

31 October, 2019 – The bill to hold a general election on 12 December has now received Royal Assent which means it is law.

It follows the confirmation of a Brexit delay until 31 January 2020 after the EU agreed to the UK’s extension request.

Prime Minister Boris Johnson had previously said the UK would leave by 31 October “do or die”. He has agreed a deal with the EU but the bill implementing it has been put on hold. It will now not progress before the general election.

https://www.bbc.com/news/uk-politics-46393399

Trade Deal with China:

Nov. 15, 2019 – The Dow Jones Industrial Average surged more than 150 points to a new all-time high on Friday after White House economic advisor Larry Kudlow said the two countries were “getting close” to reaching a trade deal.

The stock market has moved on virtually every U.S.-China trade headline for nearly two years. Kudlow, in particular, has signaled encouraging progress on China trade numerous times this year, spurring investors to be optimistic only to watch the two sides take one step forward, two steps back. The trade talks have led to nothing concrete so far.

The two sides did make some progress in the bitter trade war recently. In early October, Trump said the two nations have agreed to work up a “phase one” trade deal that includes a pause in tariff escalation and more agriculture buying from China. However, China is insisting on a removal of the existing duties in place as part of the deal, which Trump said he had not approved.

https://www.cnbc.com/2019/11/15/market-listens-when-officials-repeatedly-tout-progress-on-china-trade.html

The trade talks seem to be moving the market, not earnings which is what the market should trade on.  Earnings are lackluster at best for Q3 now that most companies have reported, which I will cover in more detail in the monthly long term update on 11/20.  CNBC announcers say the algorithmic traders have their computers scour news headlines and when they see positive comments about the China trade deal, they buy stocks and push up the market.  I don’t like it, but we’ll see how it ends.

Technical Analysis:

The stock market has continued to set new highs on optimism for the China trade deal.

Technically the chart looks good like last week.  RSI at the top of the chart is overbought at 72 (70 is overbought) and is rising.  Momentum shown by MACD at the bottom of the chart is slowing, you can see it flatten out and the histograms are shrinking slowly.  The price action is positive, rising to the right, but it is getting ready to bump into the top of the channel and that will provide resistance and a good place for a correction to start (it doesn’t have to, but the odds begin to favor it).

2019 11 16

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

What am I doing?  Last week I picked up a couple of utility stocks on the recent weakness (DUK).  I will watch what happens and if they weaken significantly from here, I would buy a little more.  People seem to be getting over their fear of recession and betting that a signed China trade deal will spur global growth.  I think any “phase 1” deal with China will be small and probably not have that much impact on global growth.  So I am still interested in good steady dividend payers, just not at nosebleed prices.  I had a bunch of covered call options expire Friday and had a couple of stocks called.  As they say, I never knew a man to go broke taking a profit.  Next week I’ll decide what to do with the stocks that are no longer covered by a call option.  I am not willing to allocate much money to an overbought market, so I am waiting for a better entry point.  If you think the market is going higher, you could buy a small piece of SPY and put a trailing stop loss order under it.  If the market continues to rise, you can continue to buy small pieces of SPY and protect them by updating the trailing stop loss order to protect all of the shares.  I did that a few weeks ago, but now that we are fully overbought I am not going to do it.

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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