Wednesday, June 24, 2015

The Morning Call---IMF spoiling the party

The Morning Call


The Market

The Averages (DJIA 18144, S&P 2124) inched higher yesterday.  Both closed above their 100 day moving averages, but below their prior highs (18295, 2135).  However skimpy the gains, the momentum is still to the upside.   As such, the targets are those prior highs and the upper boundaries of their long term uptrends.  Downside support remains their 100 day moving averages, which, as I have repeatedly noted, have been formidable the last two years.

Longer term, the Averages remained well within their uptrends across all timeframes: short term (17431-20237, 2053-3032), intermediate term (17618-23760, 1847-2615) and long term (5369-19175, 797-2138).  

Volume sunk even lower; breadth deteriorated slightly.  The VIX was off another 5%, finishing below its 100 day moving average and within a very short term downtrend and a short term trading range.  At current levels, I believe that offers value as portfolio insurance.

Retail investor sentiment (short):

            Institutional sentiment (medium):

The long Treasury was down again, ending below its 100 day moving average and the upper boundaries of very short term and short term downtrends.

GLD also declined, remaining below its 100 day moving average and the neck line of the head and shoulders pattern.  Oil was up slightly, but still closed below the upper boundary of its short term trading range. The dollar was up but remained below its 100 day moving average and within a very short term downtrend and a short term trading range.

Bottom line: upward momentum continued to decelerate, leaving the indices once again short of challenging either their former highs or the upper boundaries of their long term uptrends.  That said, at this point in the Market, I don’t expect any definitive movement in either direction until the Greek bailout situation gains clarity---barring some extraordinary exogenous event.

Stock and bond prices continue to trade inversely. 

            Yesterday’s US economic data was weighed to the positive: May durable goods were off substantially but in fairness, the ex transportation number was right in line; month to date retail sales, May new home sales and the Richmond Fed June manufacturing index were all up; the June Markit flash PMI was below expectations.  So the economy continues to show signs of stabilizing.

            Overseas, the stats were mixed: the June EU composite flash PMI was quite positive while the comparable Chinese number was equally disappointing.  Still, until the Greek bail out dilemma is resolved, little attention is going to be paid to these figures.  Speaking of the Greek bail out, the tone of the various parties turned a bit more negative than Monday’s hopey, dreamy narrative.

            The problem with Greece’s latest proposal (medium):

            Moral hazard in Greece (medium):

            The summary as of last night (medium):

            ***overnight, IMF rejects Greek bail out proposal (medium0:

Bottom line: the Greek bail out remains center stage and will probably remain so until a resolution is reached.  While the headlines yesterday were a bit less positive than Monday’s, but progress is still being made.  Who knows what the odds are of a successful completion of this deal; but the probability of a Goldilocks conclusion is sufficiently low that everyone should own some cash.

I don’t think that we should ignore yesterday’s generally upbeat economic data.  It continues the trend away from recession.  That is the good news. The bad news is that full year 2015 growth estimates are still coming down, reflecting our forecast of a slowing economic growth rate.    And in such an environment with either a Fed rate hike or a Grexit facing us, I see no reason to be chasing stock prices up.

            A good analysis of where we are in the Market (medium):
            Another comment on the effectiveness of the Fed (medium):

            Debt funded stock buybacks (medium):

            What a ‘stock picker’s market’ really means (medium):


   This Week’s Data

            The June Markit flash manufacturing index was reported at 53.4 versus expectations of 54.2.

            May new home sales rose 2.2% versus estimates of a 1.5% increase.

            The June Richmond Fed manufacturing index came in at 6 versus its prior reading of 1.

            Month to date retail chain store sales were up versus the prior week.

            Weekly mortgage applications rose 1.6% while purchase applications were up 1.0%.

            Final first quarter revised GDP fell 0.2%, down from the initial reading of -0.7% but in line with consensus; the price deflator was 0% versus expectations of -0.1%.


            China’s US debt holdings (short):

            The world’s economic exposure to China (medium):



Obama’s free trade agreement passes a procedural vote in senate (medium):


            More US/Russian saber rattling (medium):

No comments:

Post a Comment