Thursday, October 8, 2015

The Morning Call---Extremely overbought

The Morning Call


This weekend is the OU/Texas game.  Guests arriving Friday.  Partying, etc., etc.  Plus an early game (11AM).  No Morning Call tomorrow or Closing Bell

The Market

Yesterday, the indices (DJIA 16911, S&P 1995) were off to races again.  The Dow ended [a] below its 100 and 200 day moving averages, both of which represent resistance, [b] in a short term downtrend {17107-17823}, [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 {1996-2057}, [d] in an intermediate term uptrend {1927-2720} [e] a long term uptrend {797-2145}.  It finished above 1970 for the third day; it now reverts to support.

Volume declined (the third day in a row); breadth improved. The VIX (18.4) was off 5% remaining [a] above its 100 day moving average, now support, [b] in intermediate term and long term trading ranges, [c] but below the lower boundary of its short term trading range; if it trades there through the close on Friday, it will re-set to a downtrend.  

                Update on sentiment (short):

The long Treasury was down, remaining out of the well-defined strong two week rebound.  It finished above its 100 day moving average, still support; and within short term and intermediate term trading ranges. 

GLD declined, finishing [a] above right on its 100 day moving average {resistance} but back below the upper boundary of its short term downtrend, negating Tuesday’s upside break [b] within short, intermediate and long term downtrends but [c] is still developing a very short term uptrend. 

Bottom line: stocks took another step higher yesterday.  The S&P closed above 1970 resistance level for the third day, re-setting it to support.  The next areas of resistance are the 100 day moving average (2047) and the upper boundary of its short term downtrend (2056).  Several things to note (1) stocks are at even more extreme levels of overbought than before, so we are clearly closer to a selloff.  I am not suggesting a resumption of the downtrend; I am saying that this is not a time to be chasing stocks for a trade, (2) the Chinese markets opened last night and the pin action was not great and (3) volume continues quite low and that tends not to be a good sign for a continuing recovery in prices.

            The real correction is still coming (medium):

            Risk ratio charts improving (short):



            Yesterday was another slow news day.  In the US, weekly mortgage and purchase applications soared but it was primarily the result of anticipating a change in regulations. So the numbers were basically meaningless.  The other datapoint was the less than anticipated rise in consumer credit.

            This explains the jump in mortgage applications; and it is not good news (short):

            Overseas, August German industrial production fell 1.2%; and Japan held off further moves to stimulate their economy.

            ***overnight, August German exports fell 5.2% and August Japanese core machinery orders declined 5.7%.
Bottom line: in short, another quiet day in which most of the news was bad news---which kept investors positively euphoric.  I have no clue what they are thinking about.  However, I do know that the economic data is subpar and getting more so.  I also know that QE in its many forms has been a dismal failure (except QE1) wherever it has been tried by whomever has tried it.  Sooner or later, piper will almost surely be paid.

            Inside the market of stocks (medium, interesting and a good read):

            The liquidity delusion (medium):

            The latest from Marc Faber (7 minute video):


   This Week’s Data

            August consumer credit was up $16 billion versus forecasts of up $20 billion.

            Weekly jobless claims fell 13,000 versus expectations of down 6,000.


            More on Bernanke’s self-congratulatory book (medium):



  International War Against Radical Islam

            This might keep you up at night (short):

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