The Morning Call
2/17/16
The
Market
Technical
The indices
(DJIA 16196, S&P 1895) made a second significant advance in as many
days. Volume was decent, breadth
improved; and while volatility declined, it remains within very short term and
short term uptrends and well above an upward trending 100 day moving average.
The Dow ended [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 {16779-17507}, [c] back
above the lower boundary of its intermediate term trading range {15842-18295},
negating last Thursday’s break, [d] in a long term uptrend {5471-19343}, [e]
and still within a series of lower highs and right on the lower boundary of a
very short term downtrend.
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 its
short term downtrend {1894-1979}, [d] within a newly reset intermediate term downtrend
{1796-2053}; however, because it is back above the prior lower boundary of the
former trading range, we have to question whether the break was real or a head
fake. Follow through is the key, [e] in
a long term uptrend {800-2161} and [f] still within a series of lower highs and
within a very short term downtrend.
The long
Treasury was down. I noted last week’s
price spike in yesterday’s Chartology section and that the TLT was overextended
to the upside, so some backing and filling would be expected. We seem to be getting that.
Likewise, GLD
experienced a day of consolidation. But
it remains within very short term and short term uptrends as well as above an upward
trending 100 day moving average.
Bottom
line: Friday and yesterday’s pin action
were not unexpected, technically speaking.
Stocks were deeply oversold, so a bounce was logical. Short term the levels to watch are (1) the
lower boundaries of the indices’ very short term down trends and (2) the lower/former
lower boundaries of their intermediate term trading ranges.
Have
emerging market stocks bottomed? (medium)
Fundamental
Headlines
Yesterday’s
economic news was not good: the NY Fed manufacturing index was negative and
well below forecasts while homebuilder confidence was lower than expected. Overseas, fourth quarter Japanese GDP was
down 1.4% versus estimates of down 0.8% and January Chinese exports and imports
declined more than projected. In short,
nothing positive.
That
said, bad (economic) news still seems to be good (Market) news at least to investors
as they voiced hopes for more QE and negative interest rates. Whether or not that was one of the proximate
causes for the yesterday’s upbeat pin action, longer run, I continue to believe
that more central bank experimental policy making will simply dig a deeper hole
for their respective economies.
Jim Rogers on
central bank monetary policies (3 minute video):
Other
news included an announced agreement between Russia and Saudi Arabia to freeze
crude oil output if other OPEC members agreed.
I wish them luck. In the
meantime, if I am right on the economy, holding an already excessive level of
supply constant in the face of declining demand is not apt to do a lot for higher
oil prices.
***overnight,
Iran declined to join in any hold on production.
Bottom line: another
inauspicious start for economic data both here and abroad, providing still more
support for the odds of a recession.
Meanwhile, investors are seemingly clinging to the hope that QE or some
equally ill-advised monetary policy will somehow turn economic conditions
around---even though to date those policies have done nothing but contribute to
economic under performance.
I am not
suggesting that investors run for the hills.
But it does make sense to use the current rebound to take some profits
in winners that have held up during recent decline.
More
problems for EU banks (medium):
Investing for Survival
How
much do we as investors really know?
News on Stocks in Our Portfolios
Economics
This Week’s Data
The
February homebuilder confidence came in at 58 versus estimates of 61.
Weekly
mortgage applications rose 8.2%; but the more important purchase applications
fell 4.0%.
January
housing starts dropped 3.8% versus expectations of being up 2.3%; building
permits were flat versus forecasts of up 1.0%.
January
PPI was advanced 0.1% versus projections of down 0.2%; ex food and energy the
number was up 0.4% versus and anticipated increase of 0.1%.
Other
Ed
Yardini on China’s problems (medium):
Wednesday
morning humor (9 minute video):
Politics
Domestic
International War Against Radical
Islam
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