Thursday, August 13, 2015

The Morning Call---Whence the Market?

The Morning Call


The Market

Yesterday was a stomach churner, with the indices (DJIA 17402, S&P 2086) trading down dramatically at the open then recovering to close almost flat.  That said nothing really changed, technically.  The Dow ended [a] below its 100 and 200 day moving averages, both of which represent resistance, [b] slightly above the lower boundary of its recently re-set short term trading range {17385-18295}, [c] in an intermediate term trading range {15842-18295} and [d] in a long term uptrend {5369-19241}.

The Dow ‘death cross’ (short):

Who was doing the buying yesterday? (short):

The S&P finished for the second day below [a] its 100 day moving average; if it remains below this level though the close on today, the MA will revert from support to resistance and [b] the lower boundary of its short term uptrend; if it remains below this level through the close today, it will re-set to a trading range.   For the moment, it remains in uptrends across all timeframes (2102-3031, 1884-2648, 797-2145). 
Volume rose; breadth rebounded though the flow of funds remained negative.  The VIX was down fractionally---ending below its 100 day moving average and remaining within a short term trading range, an intermediate term downtrend and a long term trading range. 

Another divergence (short):

The long Treasury fell, but still finished above [a] its 100 day moving average, now support [b] the lower boundary of its short term trading range and [c] the lower boundary of a very short term uptrend.

GLD was up for the sixth day in a row, but remained below its 100 day moving average and in short, intermediate and long term downtrends.  However, it ended above   the upper boundary of its very short term downtrend; if it remains there through the close today, that trend will be negated.  It also offers the small chance that GLD has found a bottom.

Oil was again, ending below its 100 day moving average and within short and intermediate term downtrends. The dollar fell, remaining within short and intermediate term trading ranges but below its 100 day moving average. 

Bottom line: clearly there is still life in the bulls, though they have a lot of work to do if the Averages are going to re-sync on the upside.  That said, barring a big rally today, the S&P will be joining the Dow breaking below its 100 day moving average and the lower boundary of its short term uptrend.  That would not be a good sign for the larger issue ---have we seen the top?   Remain patient but pay close attention because I still believe that the big Market news near term will likely be told by the technicals.

The long Treasury traded down, but did nothing to challenge any technical boundaries, leaving the no hike/economic weakness scenario intact.    


            There were two minor datapoints reported yesterday: mortgage and purchase applications were weak; the July budget deficit was $149.2 billion.  But that number was impacted by the calendar timing of benefit payments; adjusted the figure was $110 billion---still not great.

            But the day was all about the technicals.  The day began with pessimism run rampant as the Chinese the government allowed another downward adjustment in the yuan Tuesday night.  Then stocks reversed and made up a huge deficit off the lows. 

            Two big reasons China devalued the yuan (medium):

            The counterpoint to the concerns about the yuan devaluation (medium):

            ***overnight, the yuan slipped again but the Bank of China stated that there is no reason for it to drop further.  The Greek parliament is set to vote of the recently negotiated bailout agreement.

Bottom line: whether yesterday was another short covering rally similar to Monday’s pin action or a more upbeat assessment in investors’ perception of the Chinese devaluation, I haven’t a clue.  This Market has been so schizophrenic of late, it is tough to make any judgment about what investors are or are not discounting.  So the bottom line is very much in line with the Technicals.

That said, 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.


   This Week’s Data

            July retail sales rose 0.6% versus expectations of up 0.5%; ex autos they were up 0.4%, in line.

            Weekly jobless claims increased 5,000 versus estimates of being unchanged.

            July export prices fell 0.2% versus forecasts of down 0.3%; import prices dropped 0.9% versus consensus of down 1.0%.

            More on yesterday’s wholesale inventory/sales numbers (medium):



Is Mexico really killing us at the border? (medium):

  International War Against Radical Islam

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