Thursday, September 24, 2015

The Morning Call--Pope's visit puts the country/Market on 'Hold"

The Morning Call


The Market

The indices (DJIA 16279, S&P 1938) inched lower yesterday.  The Dow ended [a] below its 100 and 200 day moving averages, both of which represent resistance, [b] in a short term downtrend {16966-17885}, [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 {2008-2072}, [d] within an intermediate term uptrend {1918-2111} and [e] a long term uptrend {797-2145}. 

Volume rose; breadth was mixed, though the flow of funds indicator made a new low. The VIX (22.1) fell slightly, remaining [a] above its 100 day moving average, now support, [b] back below the lower boundary of its a short term uptrend, if it stays below this boundary though the close on Friday, it will re-set to a trading range, [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.  Finally, it finished above the top of the zone (20) indicative of more stable stock prices.
The long Treasury declined, but closed above its 100 day moving average, still support; and it ended within short and intermediate term trading ranges. 

            Counterpoint (short):

GLD declined, closing in downtrends across all timeframes and below its 100 day moving average.  It can still build a bottom were it to fail to successfully challenge its July/August lows (104).  But that is yet to be seen. 

Oil was down 3%, staying below its 100 day moving average and within a short term trading range and intermediate and long term downtrends.

The dollar was unchanged.  It remained right on its 100 day moving average, which is now resistance, and within short and intermediate term trading ranges. 

Bottom line: yesterday stocks drifted lower on paltry volume, which was pretty weak follow through from Tuesday’s decline.   That was not particularly surprising, given their recent roller coaster performance and the fact that the Pope’s visit has dominated the news cycle.  That said, all that volatility has been within a fairly narrow trading range bounded by 17029/1970 on the upside and the lower boundaries of the indices intermediate term trends (15842/1918) on the downside.  There is really not much else to comment on until one of those boundaries are successfully challenged.

            How traders are positioned (short):

                        Market history following a down August/down September (short):



            The US economic data turned more neutral yesterday: weekly mortgage and purchase applications were up and the September Market manufacturing PMI was basically flat.

            Everything that you wanted to know about the impending government shutdown but were afraid to ask (medium):

            Overseas, the numbers were not so good---both the EU and Chinese manufacturing PMI’s were below estimates.

            ***overnight, Draghi downplayed need for further monetary stimulus while the central banks of Norway and Taiwan cut key interest rates, German business morale rose---which was likely measured before the VW scandal; further there are rumors that the  emissions fraud problem is spreading to BMW.

            Aside from the Pope’s visit there was little else in the headlines; and yesterday’s lackluster pin action likely reflected a very slow news day.           

Bottom line:  No change from yesterday’s conclusion: ‘As you know, I believe that these fundamentals argue for a slowing/shrinking economy/corporate profits.  That is a problem when stocks are near their highs based on multiple measures, though it is not a fatal one.  What makes it fatal is when investor cease to have sugar plum fairies dancing in their heads---and that seems to be starting to happen as the doubts increase that the Fed can manage a soft landing.  And it is only going to accelerate when these guys check their history books and learn something that we have known along, to wit, the Fed has never, ever in all its history executed a successful transition from easy to tight money.  And to make matters worse, any transition from here will be taking place at a time that the Fed’s balance sheet is exponentially larger than any other period in its history.

That said, I continue to believe that right now, short term the technicals are more important to watch than the fundamentals.’

            Dividend cuts in the REIT’s (short):

            More on corporate profits (short):

            Will the Fed’s inaction be the undoing of the Market? (medium):

            Head of Harvard endowment warns of ‘froth in the Market’ (medium):


   This Week’s Data

          The September Markit manufacturing PMI came in at 53.0 versus forecasts of 53.1.

                August durable goods orders fell 0.2%, in line; ex transportation, they were unchanged versus expectations of a 0.3% increase.

            Weekly jobless claims rose 3,000 versus estimates of up 11,000.


            Emerging market currencies continue to crash (short):




            Apropos of nothing except raunchy humor, this is some insight to the latest scandal to hit 10 Downing Street (medium):

            Update on progress of Iran deal (medium):

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