Thursday, March 10, 2016

The Morning Call--Christmas in March

The Morning Call


The Market

The Market consolidation process that appeared to start on Tuesday had a very mild follow through to the upside yesterday with the Averages (DJIA 17000, S&P 1989) lifting modestly on slightly better volume, but weaker breadth. The VIX declined 2%, but ended above the upper boundary of a very short term downtrend for a second day, voiding that trend and very close to its 100 day moving average.

The Dow finished [a] below its 100 day moving average, now resistance, [b] below its 200 day moving average, now resistance, [c] above the lower boundary of a short term downtrend {16671-17410}, [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] below its 100 day moving average, now 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 fell slightly, but closed well within its short term uptrend, above its 100 day moving average and above a key Fibonacci retracement level.

GLD declined fractionally, remaining in very short term and short term uptrends, as well as substantially above its 100 day moving average.  GLD is behaving much like TLT, i.e. it is consolidating but in a very healthy manner.

Bottom line: the indices recovered yesterday despite being in an extremely overbought condition.  On the other hand, their 100 day moving averages pushed back another challenge.  Nevertheless, as I said yesterday ‘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.’



            Yesterday was another ho hum day for economic indicators: weekly mortgage and purchase applications were up but January wholesale inventories were up while sales plunged.   Overseas, January UK industrial production was up.  

            ***overnight, February Chinese CPI rose 2.3%.

Most important, Draghi delivered---lower rates, more QE, expanded purchase list. (must read):

                        And in what only be described as the biggest one, two punch in QE history, China is proposing a cram down of its banking system giant portfolio of nonperforming loans (medium and a must read):

The news was elsewhere:

(1)   world’s largest oil producers will meet in Moscow on March 20, generating hopes among investors being that they will agree to some sort of production cut.  Maybe.  Many of these guys [Saudi’s, Iranians and Russians] hate each other, so getting some sort of agreement will be hard.  In addition, even assuming there is some sort of arrangement, they have historical cheated shamelessly in honoring any quotas.  Lastly, if demand falls faster than supplies are reduced, prices will still have problems sustaining higher levels.

(2)   Iran threatened to walk away from nuclear deal.  Who woulda’ thunk?  These assholes never intended to honor it in the first place and everyone on the global knew that with the exception of a few ideologues in Washington.  That said, the US probably won’t do anything no matter what Iran does.  The Israeli’s are another matter.  If the Iranians go through with their threat, the Middle East geopolitical situation would most likely become a bit dicier.

(3)   Hilsenrath signaled no Fed rate hike next week.  I think that is pretty much accepted wisdom right now.  (short):

(4)   New Zealand cut key interest rates, joining the currency war crowd.  To be sure,  New Zealand isn’t exactly a global trading force; but this move will likely help foster the ‘everybody is doing it’ mindset   (short):

Bottom line:  major oil producers meeting to hopefully discuss production cuts and the ECB expected to announce a new improved version of QE/negative interest rates.  What more could investors ask for?  OK, a pretty girl, a good scotch and Cuban cigar.  But you can’t have everything, right?  I will tell you one thing.  I would be a lot better off getting the latter than the former because an oil production freeze will get me nothing in a global recession and QE/negative rates have already proved beyond shadow of a doubt to be worthless except for the gross misallocation and pricing of assets. 

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

            Who is buying and who is selling (short)?

            The latest from former Dallas Fed chief Fisher (short):

            The latest from Doug Kass (medium):


       Investing for Survival
            What are your influences? (medium):

    News on Stocks in Our Portfolios

   This Week’s Data

            January wholesale inventories rose 0.3% versus estimates of down 0.1%, unfortunately sales plunged 1.3%.

            Weekly jobless claims fell 18,000 versus forecasts of down 6,000.


            The problem with tariffs (medium):

            More on student loans (medium):



Thoughts on political correctness (medium):

  International War Against Radical Islam

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