The Averages (DJIA 26405, S&P 2907) advanced yesterday but at markedly different rates (Dow up .61%, S&P up .13%; plus the NASDAQ was down). Still volume was up and breadth finally had a cleanly positive day. So they remain strong technically; and my assumption is that they will challenge the upper boundaries of their long term uptrends (29807, 3065).
The VIX fell another 8%, catching up to the pin action in the indices. In doing so, it is approaching the lower boundary of its short term trading range and reversing the recent trend in low volatility as stock prices rise.
The long bond was down again on big volume, finishing below both moving averages and pretty much confirming Monday’s break of the long term uptrend. While the lower boundary of its intermediate term trading range is only a couple of points away, given the length the pennant formation that was negated when TLT broke the lower boundary of its uptrend more downside should be expected. To that end, the new lower boundary of its new long term trading range is 16+ points lower. Finally, as I have noted repeatedly, I think this a significant event; not just from a technical standpoint, but the fundamental implications of noticeably higher interest rates on almost all asset classes. It would also be the second sign (the dollar funding problem being the first) of the undoing of the mispricing and misallocation of assets.
The dollar was down fractionally, but still ended above the second very short term higher low. So it continues to be technically strong. Its pin action is not likely to change as long as dollar funding problems continue in the emerging markets.
***overnight, the dollar is falling
GLD was up again (surprise, surprise), but is still the ugliest chart on the block---though it does seem to be trying to build a base.
Bottom line: the indices remain technically strong. I continue to believe that they will challenge the upper boundaries of their long term uptrends.
The dollar will likely remain strong until the dollar funding problems are resolved.
The pin action in TLT remains my main focus. It appears to have broken a twenty year plus long term uptrend which, as I noted above, has potentially significant fundamental as well as technical implications---not all of which are positive.
Yesterday in the charts.
Yesterday’s economic stats were somewhat positive: weekly mortgage/purchase applications and the second quarter trade deficit were better than expected while August housing starts were up but building permits down.
The morons in our ruling class held most of yesterday’s headlines. I don’t have the words to express just how far I believe that our political process has descended into the toilet. Ultimately, we will all be hurt whichever side of the political spectrum we are on.
Putting the political process aside, there are two more easily quantifiable problems created by our ruling class---which I have harped on endlessly are:
(1) putting our heads in the sand about the national debt is not a solution (medium):
(2) central bankers have planted the seeds of the next financial crisis (medium):
The Fed and the yield curve (medium):
Bottom line: irrespective of whether the DOJ/FBI emails/memos are redacted, what our president’s d**k looks like or how deep in sewer our political class will go to advance their agenda, I believe that (1) fiscal policy is digging the country into such a deep debt hole and (2) the Fed has so crippled price discovery that sooner or later the securities’ markets will be penalized.
***overnight, Turkey’s new economic plan (medium):
***China said that it is planning to cut the average tariff rates on many products its major trading partners.
News on Stocks in Our Portfolios
This Week’s Data
Weekly jobless claims fell 3,000 versus expectations of a rise of 6,000.
The September Philadelphia Fed manufacturing index came in at 22.9 versus estimates of 19.6.
Iranian oil sanctions appear to be working (medium):
August architectural billings rebound (short):
What I am reading today
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