Thursday, October 22, 2015

The Morning Call--Draghi's comments will be important

The Morning Call


I have to do my continuing education as a broker dealer principal today.  It is a lengthy process, so I don’t know how thorough tomorrow’s Morning Call will be.  Plus I leave Friday afternoon for my pledge class reunion, so no Closing Bell this week.

The Market

The indices (DJIA 17168, S&P 2018) continued to consolidate yesterday.  The Dow ended [a] below its 100 and 200 day moving averages, both of which represent resistance; it continued to fall away from its 100 day MA {17250}, [b] in a short term downtrend {17060-17784}, [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; it also continued the retreat from its 100 day MA {2039}, [b] below the upper boundary of a very short term downtrend, [c] in a short term downtrend, but nearing its upper boundary {1983-2044}, [d] in an intermediate term uptrend {1939-2731} [e] a long term uptrend {797-2145}.  It also closed back below its September highs after three days above it which would leave it as resistance.

Volume was flat; breadth was negative.  The VIX (16.7) was up 6%,  finishing [a] below its 100 day moving average, now resistance, [b] within a short term downtrend and [c] in intermediate term and long term trading ranges. 
The long Treasury was up 1%, ending above its 100 day moving average, still support, within very short term, short term and intermediate term trading ranges and continues to develop a pennant formation. 

GLD dropped, closing [a] above its 100 day moving average, now support [b] in a short term uptrend [c] in intermediate and long term downtrends.  In my opinion, it needs to successfully challenge the upper boundary of its intermediate term downtrend to conclusively establish that a bottom has been made.

Bottom line: stocks’ slide yesterday was sufficiently small to keep the general notion alive that recent trading is just a time based consolidation after getting extremely overbought (that is, trading in a narrow range over an extended time versus a more substantial selloff).  

On a more negative note, the Averages retreated further from their 100 day moving averages and the S&P fell back below its September high, voiding the break and leaving it as resistance. 

That all suggests a slightly more negative short term technical picture; but the indices are still in an area congested with an array of both resistance and support levels.   So it remains ‘to be determined’ whether this latest rally has more legs to the upside. 

As I concluded yesterday:  My technical bias is still on the side of another challenge of the Averages all-time highs; though on the fundamental side, (1) I don’t think that challenge will be successful and (2) Fair Value will ultimately pull prices lower.



            Little data out yesterday.  In the US, weekly mortgage and purchase applications were up, but they continue to be impacted by the change in disclosure rules---so there is no information value.  In addition, oil inventories (which I don’t normally pay a lot of attention to) were well above expectations and that caused a selloff in oil related securities.  Overseas, Japanese exports continued to fall which is just another in a long line of poor global numbers.

            More bad corporate data (medium):

            ***overnight, the Chinese central bank added liquidity to its banking system, the head of the ECC said that it was giving Greece more money as it continues to implement reforms and the ECB left key interest rates unchanged---however, all eyes remain on Draghi’s press conference, due shortly.

Bottom line: yesterday’s takeaways were: (1) the global economy continues to signal slowing growth but (2) we made it through the day without a negative earnings/revenue surprise from an industry leader except for one: American Express.  Neither cause me to doubt our forecast or beat the drum any harder for it.

Today will witness the release of the majority of this week’s datapoints (including jobless claims, existing home sales and leading economic indicators), plus the results of an ECB meeting.  I await the results.

Net, net, don’t chase stock prices at these levels.  Indeed, use the strength to take some profits in winners and/or eliminating investments that have been a disappointment


   This Week’s Data

            Weekly jobless claims rose 3,000 versus expectations of a 10,000 increase.

            The September Chicago National Activity Index came in at -.37 versus estimates of -.05.




The cost curve for Obamacare (medium):

American obesity (short):

Will Puerto Rico get a bailout? (medium):

  International War Against Radical Islam

Update on the war in Syria (medium):

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