Thursday, November 12, 2015

The Morning Call---Brace yourself; six Fed official speak today

The Morning Call


The Market

The indices (DJIA 17702, S&P 2075) drifted lower on a quiet Veterans’ Day.  The Dow ended [a] below its 100 and 200 day moving averages, both of which represent resistance, [b] in a short term trading range {16919-18148}, [c] in an intermediate term trading range {15842-18295}and [d] in a long term uptrend {5471-19343}.

The S&P finished [a] below its 100 and 200 day moving averages, both of which represent resistance, [b] in a short term trading range {2016-2104}, [d] in an intermediate term uptrend {1952-2744} [e] a long term uptrend {800-2161}. 

Volume fell slightly; breadth deteriorated.  The VIX (16.0) was up 5%, ending [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. 

            Plus (medium):

The bond market was closed.

GLD declined fractionally, ending [a] right on the lower boundary of its short term trading range [b] below its 100 day moving average, now resistance, [c] in intermediate and long term downtrends. 

Bottom line: with the bond market closed and no economic releases, stocks traded in a tight range.  My conclusion from yesterday holds: ‘I think the Market could still go either way short term.  Longer term, equities are caught between two forces: one of the most powerful seasonal (up) times of the year and the discounting of a first Fed rate hike in six years.  I have no clue which direction stocks will head; however, given current extended valuations, even if the Averages challenge their all-time highs and the upper boundaries of their long term uptrends, I don’t believe that they will be successful.’

            What it takes to be a trader these days (short):


            As I noted above, there was no US economic releases yesterday.  However, there was plenty of news overseas: October Chinese industrial production and urban fixed investment were below expectations while retail sales were better; in addition, the Financial Stability Board said that Chinese banks may need as much as $400 billion new equity in order to meet new global capital requirements.

In other news, Canada is nearing recession levels; base metal prices are  now down 50% off 2011 highs; and finally, Draghi made another super duper dovish comment and then the ECB repeated them to be sure everyone got the message (medium):

            ***overnight, Draghi tripled down on more QE in December (you sure you understand?); the Greeks are in the streets (again) protesting the non-receipt of the latest bailout package; Japanese machinery orders were up 7.5%.
            The news from Greece (medium):

Bottom line: Chinese stats continue to deteriorate; and the potential risks of economic/financial problems were made all the worse by the aforementioned statement from the Financial Stability Board.  Canada, one of our largest trading partners, is having its own set of difficulties.  And ECB apparently is not that enthralled with the EU economy, given the every pointed remarks about more QE from Draghi and other officials. 

Even if you believe that the recent improvement in the US data is a sign that the economy has stabilized, one has to question how long that will last in view of the sustained weakening abroad.

So the question is, will the Fed continue to disregard not just the poor data in the US but also the more difficult to ignore global stats and raise rates, deluding itself that somehow it still has a chance to extract itself from the policy catastrophe it has wrought.  My opinion hasn’t changed: whenever the Fed starts to normalize monetary, Market pain will be occurred; and the longer it waits, the greater the pain.

***no less than six Fed officials give speeches today.

The most important point is that I would use the strength to take some profits in winners and/or eliminating investments that have been a disappointment.
            Here are some interesting status on valuation s. (short):

            Why companies love stock buybacks (medium and today’s must read):

            For example (medium and should be read along with the above link):


   This Week’s Data

            Weekly mortgage applications fell 1.3% while purchase applications were up 0.1%.

            Weekly jobless claims were unchanged, in line.


            A sign that the economic cycle is winding down (short):



Obamacare---sucker’s bet (short):

Advice for Trump on China (medium):

  International War Against Radical Islam

1 comment:

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