I’ll keep it short this week as the market and media were a rerun of last week. The S&P 500 was down slightly and continues to work off overbought conditions. At the bottom of the chart, you can see that the momentum indicators have some room to go before fully working off the overbought condition from the last six weeks of buying. A move down to the centerline or a re-test of the previous all-time high at 3,035 are entirely possible. If the S&P 500 crosses below this level then a larger degree correction may be starting.
Volatility has been smashed these past few weeks as a reminder that the Fed continues to buy T-Bills to the tune of $60B monthly so it will be hard to fight this Fed into 2020.
Happy Thanksgiving and I’ll be back to you in a couple of weeks!
Chart of the Week!
Tesla unveiled its long-rumoured all electric pickup truck on Thursday. While the truck’s design certainly isn’t for everyone, the idea behind it is actually sound. “We need sustainable energy now. If we don’t have a pickup truck, we can’t solve it,” Musk said during the unveiling, adding that “the top three selling vehicles in America are pickup trucks.” (Statistia)
Economic & Central Banking Snippets
- The Fed was more positive about the US economic outlook at an October meeting than at a September meeting according to the minutes that were released this week. Officials discussed the economy’s resilience amid challenges and agreed taking the benchmark interest rate into negative territory would be a bad idea. “Uncertainties associated with trade tensions as well as geopolitical risks had eased somewhat, although they remained elevated,” the summary said. (MarketWatch)
- Japan’s exports in October fell 9.2% which makes the 11th straight month of declines. A fall in auto, steel and semiconductor exports led the way while exports to China were down by 10.3% and to the US by 11.4%. (Boock)
- The final November University of Michigan consumer confidence index was 96.8, better than the first print of 95.7 and the estimate of no change. It’s the 3rd straight month of increases and has almost gotten back the sharp August plunge when the tariff battle was full blown. (Boock Report)
Macro Snippets
- Saudi Aramco settled for a valuation of up to $1.7 trillion ahead of the debut of its shares in Riyadh. The world’s most profitable company said the base offer size will be 1.5% of its outstanding shares. (Investopedia)
- Ford unveiled the Mustang Mach-E SUV on Sunday. The all-electric car is the first update to the Mustang lineup in 55 years and will arrive late next year. With a starting price of almost $44,000, it will come in various versions with either a standard 75.7 kWh or extended-range 98.8 kWh lithium-ion battery and an EPA-estimated range (distance covered on a single charge) of up to 300 miles. (Investopedia)
- TikTok this year made history as China’s first social-media company to make it big in the U.S. Now, TikTok wants to shed its label as a Chinese brand as the company faces mounting scrutiny from U.S. lawmakers and regulators. (WSJ)
- Goldman Sachs sees the drag on the global economy from the trade war between the U.S. and China fading in 2020 as the bank forecasts that tariffs on American imports from the world’s second-largest economy have already peaked. (Bloomberg)
- The World Trade Organization’s Goods Trade Barometer recorded signs of a pickup in export orders, container shipping and automobile shipments, offset by weakness in airfreight, and shipments of raw materials and electronic components. The end result: International trade is likely to end the year having risen at the slowest pace since 2009. Trade flows have been weakened by a number of developments, including the U.S.-China trade war and a slowdown in the global automobile industry. (WSJ)
- Boeing has reportedly signed deals to sell 50 of its grounded 737 MAX 8 airplanes for close to $6 billion. One of the buyers, Kazakhstan’s flag carrier Air Astana, has placed an order for 30 airplanes with a list price value of $3.6 billion, according to a statement. (WSJ)
- Film studios will soon be able to own theaters as the Justice Department looks to terminate rules that reduced their power and shaped the movie industry for decades. Signed in 1948 by the Justice Department and defendants, the “Paramount decrees” prohibited movie studios from owning theaters without prior court approval. It was meant to separate film distribution and exhibition and also outlawed monopolistic distribution practices like setting minimum prices for movie tickets and bundling multiple films into a single theater license. (Investopedia)
That is all for now until next week’s Market Update. Thank you for being a subscriber!
Regards,
Paul J. McCarthy, III
President – Kisco Capital