Wednesday, October 7, 2015

The Morning Call--Watch S&P 1970 today

The Morning Call


The Market

The indices (DJIA 16790, S&P 1797) closed mixed yesterday (Dow up, S&P down), though the DJIA was heavily influenced by the positive performance by DuPont.  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 (now resistance) for the second day; if it remains above that level through the close today, it will revert to support.

Volume declined; breadth was mixed, with the flow of funds indicator breaking a downtrend. The VIX (19.4) was off fractionally remaining [a] above its 100 day moving average, now support, [b] in short term, intermediate term and long term trading ranges.  Clearly, it is below the 20 price level; further weakness would be a plus for stocks.

                NYSE short interest near record high (short):

            Stock Traders’ Almanac issues its seasonal MACD buy signal (short):

The long Treasury was up but remained 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 rose, finishing [a] above its 100 day moving average {resistance} and the upper boundary of its short term downtrend; if it closes above these boundaries through Thursday, the 100 day moving average will revert to support and the short term trend will re-set to a trading range, [b] within short, intermediate and long term downtrends but [c] is still developing a very short term uptrend. 

Oil has been strong of late and appears to be mounting an assault on the upper boundary of its short term trading range. 

Bottom line: stocks took a breather yesterday, with the S&P remaining above 1970 resistance level.  If that is successful, I can’t rule out a test of the highs.  Several things to note (1) stocks remain extremely overbought so more backing and filling should be expected at the least, (2) with the Chinese markets closed, I am not sure how accurate the technical picture is and (3) volume was low again and that tends not to be a good sign for a continuing recovery in prices.



            Not much in terms of meaningful US data was reported yesterday: the August US trade deficit came in pretty much as expected while month to date retail chain store sales fell on a week over week basis. 

However, overseas, August German factory orders fell versus expectations of being up.  In addition, the IMF lowered global growth estimates, again (medium):

            On an anecdotal basis, YUM Brands reported earnings after the close yesterday which were extremely disappointing.  This company gets almost half of its profits from China; so this is not a great narrative on the Chinese economy. 

Bottom line: yesterday was relatively quiet in terms of news flow.  The most significant points were from overseas---German factory orders and YUM’s earnings; neither of which makes me feel all warm and fuzzy.   So my conclusion hasn’t changed: ‘the economic data remains terrible both here and abroad.    Unless that changes, economic and valuation forecasts on the Street are likely to move lower irrespective of whether there is more QE.  Indeed, if the stats do continue to weaken and we do get more QE, we are all the closer to a Fed confidence implosion.’

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

            Third quarter earnings preview (medium):

            Has the energy sector bottomed (short)?

            SocGen on what will drive the Market in the fourth quarter (medium):


   This Week’s Data

            Month to date retail chain store sales fell from last week’s reading.

            Weekly mortgage applications were reported up 25.5% and purchase applications 27.0%.  However, these numbers were heavily impacted by a change in the way this data is recorded.


            A different perspective on the Market’s reaction to last Friday’s nonfarm payroll report (medium):

            Bernanke’s cockroaches (medium and today’s must read):



  International War Against Radical Islam

            The latest from Syria (medium):

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