Tuesday, October 13, 2015

The Morning Call---Overseas numbers were terrible; will bad news still be good news?

The Morning Call


The Market

The indices (DJIA 17131, S&P 2017) continued to hang on to their gains.  The Dow ended [a] below its 100 and 200 day moving averages, both of which represent resistance, [b] in a short term downtrend {17099-17808}, [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 {1990-2051}, [d] in an intermediate term uptrend {1933-2726} [e] a long term uptrend {797-2145}. 

Volume declined (which it has every day of this rally expect for one); breadth was mixed, though the flow of funds indicator remains very strong. The VIX (16.1) was off 5% finishing [a] below its 100 day moving average for the third day, re-setting to resistance, [b] within a short term downtrend and [c] in intermediate term and long term trading ranges. 

The long Treasury was up, ending above its 100 day moving average, still support; and within very short term, short term and intermediate term trading ranges. 

GLD was up, closing [a] above its 100 day moving average for the second day; if it finishes there today, it will revert from resistance to support [b] in a short term trading range, [c] within  intermediate and long term downtrends and [d] is still developing a very short term uptrend. 

After rallying last week, oil was down 5% on news that a number of smaller oil companies had hedged their production through 2016 at the recent price highs, providing enough liquidity to allow them to continue to pump oil at relatively high levels.

Bottom line: stocks put in another up day despite the lack of volume and their overbought position.  I know that I sound like a broken record, but stocks really are in an extraordinarily precarious short term technical position.  I am not trying to argue that stocks are about to tank.  Indeed, there has been enough improvement in some of the breadth indicators that stocks could trade sideways or even challenge their former highs in the seasonally upbeat November/December period.  But that is not saying much with the Averages roughly 5% off those highs.

Chasing stocks at current levels is, I believe, a losing game.  I continue to love the cash in our Portfolios.


            There were few news points of any significance yesterday.  No economic news either here or abroad.  No political news except for the slowly increasing escalation of the cat and mouse game being played out in Syria.  Of course, that ought to be enough to keep all our sphincters tightened up.  But in the current spirit of bad news is good news, I guess nuclear war in the Middle East would mean a gap open to the upside.

            ***overnight, September Chinese imports fell 20.4% while exports dropped 3.7%; the Russian finance minister said that his country’s 2015 GDP will likely fall 3.8%; September UK inflation declined 0.1%; October German economic morale was down.

Bottom line: yet another quiet day allowing stocks to drift higher.  That might not last too long since earnings season has started.  Early tabulations suggest disappointing results; but as I noted above, bad news could have a leavening effect.

I mentioned yesterday that I will be lowering our economic forecast (again) this week.  I should have the work done by Friday. 

In sum, stocks are rising in the face of a flat/slight increase to down economy, a  likely lower third quarter corporate profits shortfall and a stick of dynamite (Syria) in search of a match.  Whatever is motivating investors, it’s doing nothing for me.

            China’s bond bubble (short):


   This Week’s Data

            The September small business optimism index came in at 96.1 versus expectations of 95.8.


            The Fed and the dollar (medium):

            The Fed and the emerging markets (medium and a must read):

            What the Fed has wrought (medium):

            Baltic Dry Index falling again (short):

            Hidden EM debts could be a problem (medium):



  International War Against Radical Islam

            Arrogance and hubris in the State Department (medium):

No comments:

Post a Comment