Wednesday, December 2, 2015

The Morning Call--Stocks rise on any news

The Morning Call


The Market

The indices (DJIA 17888, S&P 2103) popped yesterday and look to be headed higher.  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}, [d] in a long term uptrend {5471-19343}, [e] but remained below the prior lower high.

The S&P finished [a] above its 100 moving average, which represents support, [b] above its 200 day moving average, now support, [c] in a short term trading range {2016-2104}, [d] in an intermediate term uptrend {1969-2762} [e] a long term uptrend {800-2161}, [f] and above its prior lower high. 

The recent history of the Santa Claus rally (short):

Volume fell; breadth improved.  The VIX (14.7) was down 9%, ending [a] below its 100 day moving average, now resistance, [b] in a short term downtrend and [c] in intermediate term and long term trading ranges. 

The long Treasury was strong again, finishing above its 100 day moving average for a second day; if it remains above that MA through the close today, it will revert from resistance to support.  It finished within very short term, short term and intermediate term trading ranges.

GLD was up again but ended [a] below its 100 day moving average, now resistance and [b] within short, intermediate and long term downtrends. 

Bottom line: the S&P pushed above the recent lower high and is now one point away from the upper boundary of its short term trading range.  That pin action is indicative of regained momentum to the upside.  The Dow’s performance was not nearly as positive.  So it is not crystal clear that the indices are going to challenge their all-time highs in the immediate future.  Although I still think that the strong seasonal bias favors one before New Year’s.


            Yesterday witnessed a number of upbeat US economic stats: month to date retail chain store sales were up considerably versus the prior week, the November Markit manufacturing PMI came in slightly above expectations , as did November light vehicle sales and October construction spending rose more than anticipated.  The bad news was that the November ISM manufacturing index was well below estimates; and in anecdotal news, the Atlanta Fed slashes its fourth quarter GDP growth forecast.

            ***overnight, Senate and House conferees reached an agreement on a $305 billion highway bill which they say will require no debt financing---I don’t have to tell what the operative words are.  And Puerto Rico made a $345 million debt payment that many believed it would default on.

            Overseas, there was also positive economic news---the first in a long time: November Chinese manufacturing PMI was at a three year low while the services PMI was up slightly; November Japanese and EU Markit manufacturing PMI’s were up; the EU jobless rate was down and UK banks passed the latest bank stress test.

            ***overnight, Chinese stocks are soaring on expectations of additional Bank of China stimulus; November EU inflation was lower than anticipated which will help the ECB’s case for more QE which is expected in the meeting tomorrow.

Bottom line: yesterday’s economic data was as good, if not better, than Monday’s was bad.  So this could be a set up for another mixed to up week.  We’ll see.

Overseas, we could be setting up for the first upbeat week of stats for months.  Of course, one week does not a trend make.  Further, the ruling classes of Europe and Japan would not be planning on introducing stimulative monetary/fiscal policies if they thought economic conditions were improving.  Again, follow through is the key.

However, the news was not so good out from Brazil (medium):

Meanwhile, stocks continue to rise no matter if the data is positive (supporting a Fed rate hike) or negative (not).  I continue to believe that it is the Market on which the Fed is focused.  So the more it smokes to the upside, the more probable a December rate hike.  But the Fed’s risk, as I suggested yesterday, is that it does raise rates and the economy rolls over---which the last thirteen weeks of data suggest is a reasonable probability.  If that happens, it can kiss investor confidence good bye.

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.

            Updates on valuation:


   This Week’s Data

            Month to date retail chain store sales were up considerably versus the prior week.

            The November Markit manufacturing PMI came in at 52.8 versus expectations of 52.6.

            The November ISM manufacturing index was reported at 48.6 versus estimates of 50.5.

            October construction spending rose 1.0% versus forecasts of +0.6%

                November light vehicle sales were 18.2 million versus projections of 18.1 million.

                Weekly mortgage applications fell 0.2% but purchase applications rose 8.0%.

            The November ADP private payroll report recorded the gain of 21,000 jobs versus an anticipated increase of 1,000.

            Third quarter nonfarm productivity rose 2.2%, in line; unit labor costs were up 1.8% versus expectations of +0.9%.


            The Atlanta Fed slashes its fourth quarter GDP forecast (short):

            Charts on business investments and consumer spending (short):

            This is a long piece on the failures of EU institutions in managing the 2007-2009 financial crisis; but it is an excellent read:



Obama’s carbon emissions on His global warming trip (short):

Restricting civil rights in the name of fighting terrorism (short):

Another thought on free speech (short):

Quote of the day (short):

  International War Against Radical Islam

            Egypt on Obama’s foreign policy (video):

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