Tuesday, September 1, 2015

The Morning Call--Overnight news is all bad

The Morning Call


The Market

The indices (DJIA 16528, S&P 1972) started the week on a down note.  The Dow ended [a] below its 100 and 200 day moving averages, both of which represent resistance, [b] in a short term downtrend {17044-17959}, [c] in an intermediate term trading range {15842-18295}and [d] in a long term uptrend {5369-19175}.

The S&P finished [a] below its 100 and 200 day moving averages, both of which represent resistance, [b] below the upper boundary of a very short term downtrend, [c] in a short term downtrend {2028-20930, [d] within an intermediate term uptrend {1900-2673} and [e] a long term uptrend {797-2145}. 

Volume rose; breadth was negative.  The VIX was up 10% closing [a] above its 100 day moving average, now support, [b] within a short term uptrend, [c] within an intermediate term trading range {it remains well above the upper boundary of its former intermediate term downtrend and [d] a long term trading range.

The long Treasury fell again, ending [a] above its 100 day moving average, now support and [b] within short and intermediate term trading ranges.   The question remains, is this down move a function of heavy sales by the Chinese and emerging market central banks or a sign that the Fed will lift rates in September and/or the economy is improving?  You know my answer.

GLD rose again, remaining below its 100 day moving average, within short, intermediate and long term downtrends but it a very short term uptrend.    The odds of a bottom having been made continue to go up.

Oil was strong again, ending above the upper boundary of its short term downtrend for a second day; if it remains there through the close on today, that trend will re-set to a trading range.  It remained below its 100 day moving average and within short (temporarily?), intermediate and long term downtrends.

            Oil driving market turmoil (medium):

The dollar fell, finishing below its 100 day moving average, now resistance, and within short and intermediate term trading ranges. 

Bottom line: while the Averages were down yesterday, the only technically significant item was the close of the S&P above 1970 after an intraday challenge.  As I noted previously, a lot of technical investors’ eyes are focused on that level.  So that has to be scored as a plus for the bulls.  That said, many support levels have been decisively busted and volatility remains quite high; so there is no ‘all clear’ signal.  Indeed, I think that the lows of last week will, at the very least, be tested.  Still my ultimate conclusion remains that the volatility has been so extreme, it is almost impossible to make any meaningful comment on the Market’s direction.

            Is a retest of the recent lows likely? (medium):

            Thoughts from technician Tom DeMark (medium):



            Yesterday’s US economic data was disappointing: the August Chicago PMI and the Dallas Fed manufacturing index came in below estimates.  In addition overseas, August Japanese industrial output was below forecast.   So nothing in the numbers to get us feeling warm and fuzzy.

            ***overnight, twin August Chinese manufacturing indices fell to the lowest levels in three years; EU August Markit PMI declined; South Korean exports declined the most in six years.

            In addition, the Chinese government imposed reserve requirements on futures positions to stem the downward pressure on the yuan.

            And Russian military forces arrive in Syria (medium):

                        Brazil in danger of credit down grade (medium):

            The main headline of the day was the Fed vice chair Stanley Fischer’s speech in Jackson Hole on Saturday, in which, he sounded a more hawkish tone, suggesting that a September Fed Funds rate hike is still a real possibility.  I don’t need to remind you that the narrative from the Fed over the last two weeks has been on the dovish side.  So Fischer’s comments just support my thesis that these guys know they are caught in their own Catch 22 and have no idea what to do about it.  For them to be niggling over 25 basis point move in the Fed Funds rate off a near zero base and whether or not this or that economic data point could alter that decision, to me, is either the height of mental masturbation or unbridled hubris---you choose. 
The cold hard fact is that whatever the Fed does is irrelevant to the economy.  The only point here is, when will the Markets realize the pickle the Fed has put them in and how much damage will be done when everyone hits the door at the same time?

Fischer’s hawkish rumblings (medium):

            David Stockman on Fischer’s Jackson Hole speech (medium):

            Time to reform the Fed (medium):

Bottom line:  last week’s rally may have been a relief to all those who are up to their snoot in stocks.  But it is only widening back out the gap between prices and values; and nothing has occurred to warrant any optimism on that count.

I don’t believe that the ‘all clear’ whistle has been blown; so I remain patient and skeptical.   Now may be one last chance to Sell your losers or a portion of your winners.

            Robert Shiller: are stocks overpriced? (medium):
            Seriously? (medium):

   This Week’s Data

            The August Chicago PMI was reported at 54.4 versus expectations of 54.9.

            The Dallas Fed manufacturing index came in at -15.8 versus estimates of -2.5.




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