Friday, November 30 , 2018, 12:22 PM, EST
- NASDAQ Composite +0.33% Dow -0.08% S&P 500 +0.20% Russell 2000 +0.05%
- NASDAQ Advancers: 1275 Decliners: 1074
- Today's Volume +5.07%
- Crude -0.89% , Gold -$0.39%
- President Trump, Prime Minister Trudeau and President Nieto gathered in Argentina today to formally sign the new U.S.-Mexico-Canada Agreement, meant to replace the Nafta pact that has governed North American trade for more than 20 years
- New York Fed President John Williams commenting on interest rates in a speech this morning "sees neutral rate low for the foreseeable future"
- On CNBC this morning Minneapolis Fed President Neel Kashkari stated that central bankers should not be raising rates while job creation continues to be strong and inflation remains tame
- November US Chicago PMI 66.4 vs. consensus 58.0 (58.4 the prior month)
All good things must come to an end? After trading in negative territory for much of the day yesterday the markets began to crawl back into positive territory after the Fed released their minutes from the November 8th meeting. The minutes didn't say anything surprising but did reinforce Federal Reserve Chairman Powell's comments from Wednesday.
Specifically, the language suggested that members agreed that we are getting closer to an estimated range of interest rates that neither speed up nor slow down growth and are now adopting a flexible approach to their policy path. Those remarks sparked a rally in the stock and bond markets while sending the dollar lower. The rally was short lived, led by defensive sectors and faded into the close on a day when volume was weaker than usual.
What this told us is that conviction remains tepid coming off of three consecutive days of gains. While interest rate fears, for the time being, have been calmed, a global growth slowdown and an escalating trade war remain front and center.
Today's action is muted at best. The G-20 meeting is just beginning with the pivotal dinner not taking place between President Trump and Chines Premiere Xi Jinping until Saturday night. There were some early encouraging comments by U.S. Trade Representative Robert Lighthizer who said that he expects the dinner to be a success.
What, exactly, constitutes a "success" is of debate today. I don't think anybody thinks that there will be a definitive agreement struck. More likely "success" will be judged from progress being made. That progress could be seen in the form of rhetoric and photo ops, which is a lot like smoke and mirrors or specific action or non-action such as President Trump not enacting new tariffs on additional Chinese goods as he has threatened to do in January.
Either way the early money is on progress towards an agreement with nothing definitive determined. Earlier this morning comments from both New York Fed President Williams and Minneapolis Fed President Kashkari were speaking from the same page as the Fed minutes and comments by Chairman Powell on Wednesday, confirming that a more flexible interest rate path is warranted for 2019.
Finally today is November 30th which is a Friday and the end of the month so many in the markets view this as a risk off day especially with events that could play out over the weekend….and thus the subject title today "much ado about nothing".
The economic calendar is fairly bare today with just one report crossing the wires. November Chicago business activity rose to 66.4 from 58.4 the prior month. Within the report the business barometer rose at a faster pace, prices paid rose at a slower pace, new orders rose at a faster pace and employment rose at a faster pace all signs of expansion.
Looking at the commodity space oil giving a little back at the moment after yesterday's rise as there are expectations that OPEC and Russia would agree to some form of production cuts when they meet formally on December 6th and 7th in Vienna.
With the dollar treading water today gold is also trading range bound as we await further details / sound bites on a trade deal with China. The yield on the 10 year is down a little to 3.01 while the VIX has risen a bit from yesterday but still below 20 at 18.89.
Looking at category performance the majority of the sectors are in positive territory so far. Nine of the eleven sectors are in the green led by Materials, Technology and Consumer Discretionary. Lagging today are Energy and REIT's. That's it for today. Trivia question below. Just hit reply to this e-mail with your responses. Have a great weekend everyone!
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Brian's Technical Take; Airline Stocks Flying Higher
Equities today are rebounding from early morning weakness and the S&P 500 is having its best week, +4.3%, in more than nine months. It has already been an action packed day starting with the leaders from Mexico, Canada, and the US signing a new North American trade deal (NAFTA 2.0).
Later in the morning US trade Representative Robert Lighthizer expressed optimism over the much anticipated Trump-Xi dinner. And NY Fed President John Williams is speaking and his comments support the recent dovish slant coming from out of the Fed.
Despite the above optimism crude oil is on pace to close at fresh 52-week lows and its eighth consecutive week in the red. After declining 10.8% in October, WTI is down 23.2% in November for its worst monthly decline in more than ten years.
Lower crude prices is a tailwind for the airline industry and thus it should be no surprise the airline index (XAL) is cementing its best monthly performance, +9.7%, in four years. As the broad equity indices and many other sub-industries rebounded to new highs this summer and fall, the XAL made its peak with a "double top" pattern during the Q1 correction before declining 24% to its lows in late October.
From its October lows the XAL has rebounded more than 14% to today's high. In constructive fashion today it has broken out above its down trend line connecting the March and September highs, however it has stalled right at the 200-day moving average where expected overhead supply is kicking in.
The daily RSI is approaching the "overbought" 70 level which reflects the recent bullish activity, but also suggests a period of consolidation could start at any moment. Corrections during uptrends are expected and healthy and we will be looking to see if the recent trend of "higher lows and higher highs" continues
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