Monday, November 9, 2015

Monday Morning Chartology

The Morning Call


The Market

       Monday Morning Chartology

            After a big run, the S&P slowed down late last week, testing the upper boundary of its short term trading range, then falling back.  However, the decline was not by much, leaving the index within a short striking distance of that boundary.  The slowdown in upward momentum was likely the result of the growing awareness that a December rate hike is increasingly probable.  That said, the reaction was miniscule when compared with past instances where Markets thought that the Fed was going to raise rates---suggesting investors believe that the economy is strong enough to not be impacted by higher interest rates.  That brings us closer to the test of my thesis that higher rates will have little effect on the economy but will significantly impact the Market.

            The Santa Claus rally (short):

            Bond investors finally decided to get serious about a December rate hike, presumably a result of the Friday jobs report and/or the Fed’s Bullock’s comment that a bad jobs number could still argue for a rate hike.  On Friday, TLT was down 1.5%, finishing (1) below its 100 day moving average, now support; but if it trades there through the close on Tuesday, it will revert to resistance, and (2) below the lower boundary of the developing pennant formation; this violation points to more downside in bond prices.  Meanwhile, TLT remains within short and intermediate term trading ranges.  As important, not only did the long Treasury take it in the snoot on Friday, bond prices across all spectrums were down sharply.

            Question: is this chart ugly or what?  To be fair, GLD does tend to trade inversely to interest rates; so the latest move down is not exactly unexpected.  But it is not the direction of price that is bothersome right now but the level.  It is now at its lows of 2009.  I just wonder how much farther it can fall.

            The dollar soared last week as the notion of higher interest rates gained momentum.

            The VIX is back inside its five year trading range, closing Friday below its 100 day moving average, within a short term downtrend and an intermediate term trading range.  I still believe that below 13, the VIX offers good value as portfolio insurance.


        ***overnight, October Chinese exports fell 6.9% while imports dropped 18.8%; the OECD lowered its global growth estimates for 2015 and 2016; German exports were better than expected.

       Investing for Survival
            The Market is smarter than you.


   This Week’s Data


            Update on the Baltic Dry Index (short and not good):

            The current state of the subprime mortgage market (short):

            Corporate leverage at record levels (medium):



More problems for Hillary (medium):

New ones for Ben Carson (medium):


            Will Portugal become the next Greece? (medium):

                Another step in curbing the risks of ‘too big to fail’ banks (medium and a must read):

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