Wednesday, March 9, 2016

The Morning Call--Awaiting tomorrow

The Morning Call

3/9/16

The Market
         
    Technical
           
Surprise, surprise, the indices (DJIA 16964, S&P 1979) actually declined yesterday, as volume remained low and breadth mixed.  The VIX was 7%, ending above the upper boundary of a very short term downtrend (if it remains there through the close today, the trend will be voided) and very close to its 100 day moving average.

The Dow finished [a] back below its 100 day moving average, negating Monday’s break and hence remaining resistance, [b] below its 200 day moving average, now resistance, [c] above the lower boundary of a short term downtrend {16678-17426}, [c] in an intermediate term trading range {15842-18295}, [d] in a long term uptrend {5471-19343}, [e] and has now made a third higher high.

The S&P ended [a] back below its 100 day moving average, negating Monday’s break and hence, remaining resistance, [b] below its 200 day moving average, now resistance [c] within a short term trading range {1867-2104}, [d] in an intermediate term trading range {1867-2134}, [e] in a long term uptrend {800-2161} and [f] has now made a second higher high. 

The long Treasury rallied 1%+, closing well within its short term uptrend, above its 100 day moving average and above a key Fibonacci retracement level.

            And, this from Japan (short):

GLD fell fractionally, remaining in very short term and short term uptrends, as well as substantially above its 100 moving average.  The meager decline was a bit surprising given how overextended GLD is.

Bottom line: finally, stocks retreated after getting as overbought as I have seen them in a couple of years.  In other words, yesterday’s pin action was hardly a surprise or an indication that the current uptrend has petered out.  It is noteworthy that the Averages couldn’t sustain Monday’s challenge of their 100 day moving averages---remember how forcefully these MA’s have served as both resistance and support over the last couple of years.  However, given the strong momentum of the recent rally, it seems likely that those resistance levels will be challenged again.  Whether or not they prove to be the impenetrable, I still believe that the indices will not set new all-time highs anytime soon.

            The latest from Doug Kass (medium):

    Fundamental

       Headlines

            This week is going to be very slow in terms of new US economic data not only in the quantity of stats but the absence of any primary indicators.  Yesterday was a good example: the February small business optimism index came in below expectations and month to date retain chain store sales were up slightly versus the prior week.

            Overseas, the numbers were mixed---yes, there was actually a positive number, namely January German industrial production, which rose.  The bad news, however, was really bad news as February Chinese exports declined 25.4% year over year while imports fell 13.8%.  That was a lot worse than one would have assumed given the comments out of last weekend’s Chinese National Congress.  But then we know that Chinese forecasts and data can’t be trusted.

            That leaves Thursday’s ECB meeting as the ‘event’ of the week.  Consensus is that Draghi will make big move toward more QE/negative interest rates.  ‘Consensus’ being the operative word because I don’t believe that there is a lot of room in current stock prices for disappointment.

            Draghi’s options (medium):


                Which are only slightly better than those for the Bank of Japan (medium):


                ***January UK industrial production was up 0.3%; world’s largest oil producers will meet in Moscow on March 20; Iran threatens to walk away from nuclear deal.


Bottom line:  investors seem all atwitter about the prospects for more QE from the ECB and the Bank of Japan and a dovish Fed meeting next week.  And they may get all they hope for; but as the saying goes, be careful what you wish for.  QE/negative interest rates have done little positive for the global economy and, arguably, have been the primary reason for the mess that it is now in.  So what does more of a disastrous policy buy you?  Absolutely nothing.  How much of that is already in stock prices?  Don’t know.  What happens if Draghi, Yellen, Abe fail to deliver?  Don’t know. 

 But in my opinion, the current rally represents another excellent opportunity to sell a portion of your profitable investments and sell your losers.


            The latest from John Hussman (medium):

       Investing for Survival
   
            A dozen things I have learned from Richard Thaler.

    News on Stocks in Our Portfolios
 
Economics

   This Week’s Data

            Month to date retail chain store sales rose slightly from the prior week’s reading.

            Weekly mortgage applications rose 0.2% while purchase applications were up 4.0%.

   Other

            EIA’s dire oil forecast (medium):

            Why banks are propping up energy companies (medium):

Politics

  Domestic

National Review of Trump’s trade policy (medium):

From my favorite liberal blog: the crapification of healthcare (medium/long):

Quote of the day (short):

  International War Against Radical Islam






 The Morning Call

3/9/16

The Market
         
    Technical
           
Surprise, surprise, the indices (DJIA 16964, S&P 1979) actually declined yesterday, as volume remained low and breadth mixed.  The VIX was 7%, ending above the upper boundary of a very short term downtrend (if it remains there through the close today, the trend will be voided) and very close to its 100 day moving average.

The Dow finished [a] back below its 100 day moving average, negating Monday’s break and hence remaining resistance, [b] below its 200 day moving average, now resistance, [c] above the lower boundary of a short term downtrend {16678-17426}, [c] in an intermediate term trading range {15842-18295}, [d] in a long term uptrend {5471-19343}, [e] and has now made a third higher high.

The S&P ended [a] back below its 100 day moving average, negating Monday’s break and hence, remaining resistance, [b] below its 200 day moving average, now resistance [c] within a short term trading range {1867-2104}, [d] in an intermediate term trading range {1867-2134}, [e] in a long term uptrend {800-2161} and [f] has now made a second higher high. 

The long Treasury rallied 1%+, closing well within its short term uptrend, above its 100 day moving average and above a key Fibonacci retracement level.

            And, this from Japan (short):

GLD fell fractionally, remaining in very short term and short term uptrends, as well as substantially above its 100 moving average.  The meager decline was a bit surprising given how overextended GLD is.

Bottom line: finally, stocks retreated after getting as overbought as I have seen them in a couple of years.  In other words, yesterday’s pin action was hardly a surprise or an indication that the current uptrend has petered out.  It is noteworthy that the Averages couldn’t sustain Monday’s challenge of their 100 day moving averages---remember how forcefully these MA’s have served as both resistance and support over the last couple of years.  However, given the strong momentum of the recent rally, it seems likely that those resistance levels will be challenged again.  Whether or not they prove to be the impenetrable, I still believe that the indices will not set new all-time highs anytime soon.

            The latest from Doug Kass (medium):

    Fundamental

       Headlines

            This week is going to be very slow in terms of new US economic data not only in the quantity of stats but the absence of any primary indicators.  Yesterday was a good example: the February small business optimism index came in below expectations and month to date retain chain store sales were up slightly versus the prior week.

            Overseas, the numbers were mixed---yes, there was actually a positive number, namely January German industrial production, which rose.  The bad news, however, was really bad news as February Chinese exports declined 25.4% year over year while imports fell 13.8%.  That was a lot worse than one would have assumed given the comments out of last weekend’s Chinese National Congress.  But then we know that Chinese forecasts and data can’t be trusted.

            That leaves Thursday’s ECB meeting as the ‘event’ of the week.  Consensus is that Draghi will make big move toward more QE/negative interest rates.  ‘Consensus’ being the operative word because I don’t believe that there is a lot of room in current stock prices for disappointment.

            Draghi’s options (medium):


                Which are only slightly better than those for the Bank of Japan (medium):


                ***January UK industrial production was up 0.3%; world’s largest oil producers will meet in Moscow on March 20; Iran threatens to walk away from nuclear deal.


Bottom line:  investors seem all atwitter about the prospects for more QE from the ECB and the Bank of Japan and a dovish Fed meeting next week.  And they may get all they hope for; but as the saying goes, be careful what you wish for.  QE/negative interest rates have done little positive for the global economy and, arguably, have been the primary reason for the mess that it is now in.  So what does more of a disastrous policy buy you?  Absolutely nothing.  How much of that is already in stock prices?  Don’t know.  What happens if Draghi, Yellen, Abe fail to deliver?  Don’t know. 

 But in my opinion, the current rally represents another excellent opportunity to sell a portion of your profitable investments and sell your losers.


            The latest from John Hussman (medium):

       Investing for Survival
   
            A dozen things I have learned from Richard Thaler.

    News on Stocks in Our Portfolios
 
Economics

   This Week’s Data

            Month to date retail chain store sales rose slightly from the prior week’s reading.

            Weekly mortgage applications rose 0.2% while purchase applications were up 4.0%.

   Other

            EIA’s dire oil forecast (medium):

            Why banks are propping up energy companies (medium):

Politics

  Domestic

National Review of Trump’s trade policy (medium):

From my favorite liberal blog: the crapification of healthcare (medium/long):

Quote of the day (short):

  International War Against Radical Islam






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