The Morning Call
8/6/15
The
Market
Technical
The indices
(DJIA 17540, S&P 2099) continued out of sync yesterday. The Dow fell ending [a] below its 100 and 200
day moving averages, both of which represent resistance, [b] in a short term trading
range {17385-18295}, [c] in an intermediate term trading range {15842-18295}
and [d] in a long term uptrend {5369-19175}.
The S&P was
up, finishing back above its 100 day moving average and the lower boundary of
its short term uptrend, voiding the challenges to each. It remains in uptrends across all timeframes
(2095-3074, 1880-2646, 797-2145).
Volume rose;
breadth was mixed. The VIX fell, closing
below its 100 day moving average and remaining within a short term trading
range, an intermediate term downtrend and a long term trading range (remains a
plus for stocks).
The long
Treasury declined. It closed back below its
100 day moving average, voiding Tuesday’s break and below the lower boundary of
a very short term uptrend, which will be negated if it remains below that level
at the close today. This pin action
likely reflecting sentiment that a rate hike is coming soon.
GLD was down,
remaining below its 100 day moving average and in downtrends across all
timeframes.
Oil fell, finishing
below its 100 day moving average and within short and intermediate term downtrends.
The dollar also declined, remaining above its 100 day moving average and within
short and intermediate term trading ranges.
Bottom line: the
S&P’s rally yesterday eliminated all challenges to support. Of course, it remains near its 100 day moving
average and the lower boundary of its short term uptrend; so it could easily
mount another assault on those boundaries.
The Dow, on the other hand, made no attempt to recoup recent
losses. The longer it remains below the
boundaries that it has re-set, the stronger they become. So the central technical question remains,
which of the indices will change direction and re-sync with its partner?
Fundamental
The
US economic data had another good day: weekly mortgage and purchase
applications were up; the July Markit services PMI was up somewhat while the July
ISM nonmanufacturing index was strong. The
bad news was the June US trade deficit was slightly larger than anticipated and
the July ADP private payroll report was well below expectation. In sum, this week’s stats continue to be
upbeat.
The
government’s accounting (today’s must read):
That
said, we continue to receive enough lousy anecdotal economic signals to raise
questions. (medium):
In
other news, another regional Fed bank chief stated that September interest rate
hike was still very much data dependent---in other words, contradicting Tuesday’s
Atlanta Fed head’s statement. Can you
say ‘hopelessly confused’?
Why
the Fed is screwed (medium):
Overseas,
July Chinese services PMI was better than expected while June EU retail sales
were disappointing
Bottom line: yesterday’s
data dump probably locks in a good week for the economic evidence. On the other hand, we keep getting pounded
with lots of negative anecdotal data. That
isn’t necessarily a telling factor but it does keep any thoughts that the
economy is growing faster than our recently downwardly revised forecast from
gaining much traction.
The Fed keeps up
its ‘on the one hand, on the other hand’ narrative, while doing nothing. Not that it matters at this point, because it
is already too late to avoid the problems that inevitably arise from a botched
transition from easy to tight/normal monetary policy. Unfortunately, this time around, QEInfinity
has so distorted the Fed’s balance sheet and investor asset pricing/allocation decisions,
there is no telling how painful the consequences will be once Fed policy and
the Markets start to mean revert.
I continue to believe
that the key investment strategy today is to take advantage of the current high
prices to sell any stock that has been a disappointment or no longer fits your
investment criteria and to trim the holding of any stock that has doubled or
more in price.
Invest
with the cool kids, or not? (medium):
Economics
This Week’s Data
The
July Markit services index was reported at 56.7 versus expectations of 55.2.
The
ISM nonmanufacturing index came in at 60.3 versus estimates of 56.2.
Weekly jobless claims
rose 3,000 versus forecasts of a 6,000 increase.
Year
over year July retail chain store sales growth declined from its June reading.
Other
Greece
needs a E100 billion in debt relief (medium):
There
is no inflation !!!??? (short):
Inventories
and GDP (short and a must read):
Politics
Domestic
International War Against Radical
Islam
Iran
refuses IAEA access to nuclear scientists (medium):
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