Tuesday, November 3, 2015

The Morning Call---Everything coming up roses--except the data

The Morning Call


The Market

The indices (DJIA 17828, S&P 2104) spiked again yesterday.  The Dow ended [a] above its 100 moving average, now support, [b] above its 200 day moving average, now support, [c] above the upper boundary of its short term downtrend {17021-17734}; if it remains there through the close on Wednesday, it will re-set to a trading range, [d] in an intermediate term trading range {15842-18295} and [e] in a long term uptrend {5471-19343}.

The S&P finished [a] above its 100 moving average, now support, [b] above its 200 day moving average, now support, [c] right on the upper boundary of its short term trading range {2016-2104}, [d] in an intermediate term uptrend {1948-2940} [e] a long term uptrend {800-2161}, [f] above its September highs, now representing support.

Volume declined; breadth was up.  The VIX (14.1) fell 6%,  finishing [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.  Below 13, it will again represent good portfolio insurance.
The long Treasury was down fractionally, ending above its 100 day moving average, still support, within very short term, short term and intermediate term trading ranges and continues to develop a pennant formation. 

GLD was down, closing [a] below its 100 day moving average, now support; but if it ends below that MA through Wednesday, it will revert to resistance,  [b] in a short term uptrend [c] in intermediate and long term downtrends.  In my opinion, it needs to successfully challenge the upper boundary of its intermediate term downtrend to conclusively establish that a bottom has been made---and clearly the reverse is occurring.

Bottom line: the Averages continued to press to the upside, with seasonal factors providing a tailwind.  The odds of challenging their all-time highs and the upper boundaries of their long term uptrend continue to improve.  Although I still believe that those challenges, especially to the upper boundaries of the long term uptrends, will be unsuccessful.


            The US stats were slightly positive yesterday: the October manufacturing PMI was in line, the October ISM manufacturing index was 0.1 ahead of estimates while September construction spending beat expectations nicely.  We needed some good news after a disastrous set of numbers last week.

            Overseas, the data was mixed: the October Chinese manufacturing index was down, the EU number up slightly while the UK index was up more than consensus; the ECB stated that Greece banks need to raise $15.9 billion in new capital to offset prior losses.

Bottom line:  everything continues to come up roses for the Market despite the fact that (1) economic data has been disappointing in nine of the last ten weeks and yesterday’s release of the Atlanta Fed’s downgrade of its fourth quarter GDP growth estimate and (2) a mediocre [to date] third quarter earnings season.  In my opinion, the only reasonable explanation for that is more competitive QE from global central bankers.

Which makes the media’s yakking about the increasing odds of a December Fed rate hike a bit mystifying because it assumes (1) a dramatic improvement in the economy---belied by the Atlanta Fed forecast or (2) that the Fed has suddenly changed its easy money stripes---believe that at your own risk.  I have no idea what these guys are thinking about.

I believe that anyone buying stocks at current valuations on more monetary easing is assuming an unnecessary and unacceptable level of risk.  Hence, I would not chase stock prices at these levels.  Indeed, I would use the strength to take some profits in winners and/or eliminating investments that have been a disappointment.

The Atlanta Fed’s fourth quarter GDP estimate (short but not sweet):

            The earnings enigma (short):

            Six reasons to be bullish---or not (medium):

            Update on valuation (medium):


   This Week’s Data

            The October PMI manufacturing index was flat with September at 54.1.    

            The October ISM manufacturing index came in at 50.1 versus expectations of 50.0.

            September construction spending rose 0.6% versus estimates of up 0.4%.


            For the bulls (short):

            How close are we to the next financial crisis? (medium):

            China’s hidden nonperforming loan bomb (medium):



Obamacare fraud, etc. (a bit long but a must read):

 A thought on our university system (short):

Quote of the day (short):

  International War Against Radical Islam

No comments:

Post a Comment