Mike’s Morning Brief – October 23, 2019

By October 23, 2019 Mike's Morning Brief

What’s going on in the world…

Market opened flat despite some pretty poor earnings reports. Outlooks were cut at Caterpillar, Boeing and Texas Instruments. Interestingly, CAT sold off big time pre-market, but opened in the green in the regular session. A lot of bad stuff has already been priced into CAT. Does that carry through to the overall Market? Too soon to tell. TI is the opposite, with an 8% decline in early trading. Microsoft reports after the close. Brexit is looking more and more likely for a delay beyond October 31, and another referendum could very well happen. Stocks sold off towards the close yesterday when the Prime Minister’s plan lacked the votes. Trick or Treat in the United kingdom will take on a whole new meaning. Not much new on US-China trade as headlines remain more on de-escalation than details of a “phase one” deal expected to be signed by President Trump and Xi at APEC next month in Chile. China’s pursuit of $2.4B in retaliatory tariffs against the US, stemming from an Obama-era trade dispute, could be used as a bargaining chip in upcoming negotiations with Washington. Commerce Secretary Wilbur Ross said President Trump could choose “some other form of negotiation” to deal with the administration’s tariffs on EU auto imports. The Dow, S&P 500 and Nasdaq, have now alternated between gains and losses for eight straight days, although all are higher than where they were before that streak began. It’s basically been sideways action in so many interval measurements. It’s the case since the July highs. The S&P is basically flat since April too. And the most significant point is the S&P has made next to no progress since the January 2018 highs. That’s 20 months of sideways. It’s typical late cycle price action. Closing below that 3K level yesterday, the S&P 500 is still just 1% away from its July record close, while the Dow is 2% below its record close. Tech the worst performing S&P subsector both yesterday (-1.4%) and over the last week (-2.2%). Tech, in aggregate, has lost its leadership and momentum. Apple has been a lone leader of late. Facebook CEO Mark Zuckerberg will be testifying on Capitol Hill, and will no doubt make new friends in the process (insert sarcasm)… Stocks are mixed. Bonds are higher, with lower rates. The Dollar is catching a bid as is Gold, while Oil is flat. The VIX is back down to 14. The last time it touched this level, stocks sold off sharply at the end of September. It also happened ahead of the August decline and the May decline. The VIX is even lower than it was ahead of last December’s crash. We don’t see another crash ahead necessarily. But the setup for a selloff is certainly there. Keep those belts buckled. The roller coaster is still going.

Have a great morning,

Mike Frazier