Friday, November 20, 2015

The Morning Call---Through the looking glass

The Morning Call


The Market

The indices (DJIA 17733, S&P 2081) took another break yesterday, remaining unable to develop strong follow through in either direction.  The Dow ended [a] above its 100 moving average, which represents support, [b]  above its 200 day moving average, now support, [c] within 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] above its 100 moving average which represents support, [b]  above its 200 day moving average, also support, [c] in a short term trading range {2016-2104}, [d] in an intermediate term uptrend {1961-2754} [e] a long term uptrend {800-2161}. 

Volume rose slightly; breadth was negative.  The VIX (17) was up, 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. 
The long Treasury rose, closing right on its 100 day moving average, now resistance and within very short term, short term and intermediate term trading ranges.

GLD was up slightly, ending [a] in a short term downtrend, [b] below its 100 day moving average, now resistance, [c] in intermediate and long term downtrends. 

The dollar sold off, trading over its 100 day moving average and within short term and intermediate term trading ranges, but breaking below the lower boundary of a developing very short term uptrend.

Bottom line: the Averages paused again yesterday, unable to follow through on Wednesday’s big day.  Given the two powerful rally days this week, it seems like there is enough momentum to carry prices higher; and indeed, the Averages did manage to bust through very short term downtrends.  On the other hand, absent upside follow through today, they will have made another lower high on Wednesday.  Further, on the tenuous assumption that investors believe that the economy is strong enough to handle a rate hike, bonds and the dollar again were unsupportive. 

I keep falling back on seasonal factors as the primary source of the recent buying enthusiasm; and I see no reason to change that view.  So a challenge of the indices’ all-time highs and the upper boundaries of their long term uptrends still seems the most likely course; although I also believe that the schizophrenic behavior of the Averages supports my contention that any challenges will be failures.

All that said, I remain somewhat perplexed by the recent pin action.
            December seasonal bias (short):



            Yesterday’s US economic data was upbeat for a change: weekly jobless claims were a bit disappointing but the Philly Fed index as well as the leading economic indicators were both better than anticipated.  However, with only one secondary indicator out to today, this week returns to the negative column. 

            Overseas, both Japanese October imports and exports fell noticeably and the Baltic Dry Index hit an all-time low.  So at the risk of insulting the Fed one too many times, these are just another set of data released by all our major trading partners over last month that presents not one iota of confirmation that the global economy is ‘improving’.

            ***overnight, Draghi quintupled down on his recent campaign to insure that the world clearly understands that more EU QE is coming.

                In addition, the Greek parliament passed reform measures demanded by EU lenders as a condition to receive additional bail out funds.

            Speaking of the Fed, and I wish that I wasn’t, it held center stage yesterday as two FOMC members were out talking up the odds of a December rate hike.  I have little to add to the heap of hot tongue I have already laid on these folks.  But here are some other opinions:

            The Fed’s policy mistake (medium):
            A look at the history of Fed induced volatility (short):

David Stockman goes another round with the Fed (medium and a must read):

Counterpoint: ever the optimist (medium):

Bottom line:  yesterday’s was a welcome respite in an otherwise disappointing week of US data; unfortunately, this week’s dataflow is largely complete and it is downbeat.  Ditto the overseas stats except that they are in a virtually uninterrupted string of lousy stats. 

The Fed seems to have gone through the looking glass and somehow believes that the persistent barrage of disappointing economic data is positive.  Or more properly said, it ‘says’ that these numbers are upbeat.   But we know that it is the Market that is positive and as long as it stays that way, the Fed will likely hike rates in December. 

Not that a 25 basis point rise in rates will make a difference to the economy.  It won’t; although admittedly, it will increase upward pressure on the dollar which will make life more difficult for the US multinationals.  

The impact will, in my opinion, be felt by the Market.  To be sure, this week’s pin action is not very supportive of that position.  But I am sticking with it.

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.


   This Week’s Data

            The October leading economic indicators were up 0.6% versus consensus of up 0.5%.


            The Baltic Dry Index is at all-time lows (short):

            China continues its campaign of intimidation against financial institutions (medium):



Can this be true? (short):

Largest health care insurer may exit Obamacare (medium):

Clinton Foundation running a $20 million hedge fund in Colombia (medium):
House approves tougher refugee screening bill (medium):

  International War Against Radical Islam

            Barbarians at the gate (medium and a must read):

            The most important question about ISIS (medium):

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