The Morning Call
1/21/16
The
Market
Technical
Talk about a
roller coaster ride; yesterday was the equivalent of the Texas Shootout. The indices (DJIA 15766, S&P 1859) were
down huge intraday, but recovered and then just finished down. The Dow closed [a] below its 100 day moving
average, now resistance, [b] below its 200 day moving average, now resistance,
[c] below the lower boundary of a short term downtrend {16903-17665}, [c] below
the lower boundary of its intermediate term trading range {15842-18295}; if it remains
there through the close on Monday, it will reset to a downtrend, [d] in a long
term uptrend {5471-19343}, [e] below its August 2015 low and [f] and still
within a series of lower highs.
The S&P
finished [a] below its 100 day moving average, now resistance, [b] below its
200 day moving average, now resistance [c] below the lower boundary of a short
term downtrend {1938-2028}, [d] below the lower boundary of its intermediate
term trading range {1867-2134}; if it remains there through the close on
Monday, it will reset to a downtrend, [e] in a long term uptrend {800-2161} [f]
below its August 2015 low and [g] still within a series of lower highs.
Volume rose---though
nothing typical of a panic selloff; breadth was poor. The VIX was up 6%, ending [a] above its 100
day moving average, now support and [b] in short term, intermediate term and
long term trading ranges.
The long Treasury
was up 1%, finishing above the upper boundary of its very short term trading
range; if it remains there through the close today, it will reset to an uptrend. It also ended above its 100 day moving
average, now support and within short term and intermediate term trading
ranges.
GLD was up 1%, but
still closed [a] below its 100 day moving average, now resistance and [b]
within short, intermediate and long term downtrends.
Bottom line: yesterday’
pin action had some of the elements of panic selloff; unfortunately, volume
didn’t support that notion. Nor did the
fact that the indices still closed down for the day and ended below the lower
boundaries of their intermediate term trading ranges. Given this sort of ‘mixed’ close, I think the
Market could go either way: up to work off an extremely oversold condition or
down as follow through from breaking a significant support level.
Fundamental
Headlines
Yesterday’s
US economic data was pretty rotten; December housing starts and building
permits were below forecasts, December CPI was below estimates, month to date
retail chain store sales grew less than the prior week and while weekly mortgage
applications rose, the more important purchase applications fell.
There
were no international stats, but there was no shortage of worrisome news:
(1)
the former chief economist for the BIS warned of
multiple bank defaults (medium),
(2)
Saudi Arabia curtailed
currency speculation in the riyal (you know, because it has worked so well for
everyone else, i.e. the Swiss and the Chinese) (medium):
***overnight,
the ECB left key rates unchanged and China made a substantial injection of liquidity
into its financial system.
Bottom line: the
US economic news continues to deteriorate.
And the international news was even worse. The last thing the global economy needs is
(1) insolvent banks [even though US banks are in relatively good shape] and (2)
more government efforts to thwart Market adjustments---because they have a way
of causing more problems than they were implemented to solve. As I said yesterday, I don’t need these kind
of problems to get stock prices down to Fair Value; though they are likely to
serve as an accelerant.
I am not
suggesting that investors run for the hills.
I am suggesting that on any rally that (1) they take some profits in
winners that have held up during this decline and/or eliminate investments that
have been a disappointment and (2) they lose the notion of ‘buying the dips’.
Echoing
my thoughts (medium):
Economics
This Week’s Data
Month
to date retail chain store sales grew at a slower rate than the previous week.
Weekly
jobless claims rose 10,000 versus expectations of a decline of 9,000.
The
January Philadelphia Fed manufacturing index came in at -3.5 versus estimates
of -4.0; however the December reading was revised from -5.9 to -10.0.
Other
Former
BIS head economist speaks and what he says isn’t pretty (medium):
Politics
Domestic
Flint’s blue
model crisis (medium):
International War Against Radical
Islam
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