Tuesday, April 5, 2016

The Morning Call---The Market takes a rest

The Morning Call


The Market

The indices (DJIA 17737, S&P 2066) drifted lower yesterday on declining volume and weaker breadth, but still within very short term uptrends.  The VIX lifted 8%, but remained in a very short term downtrend and below its 100 day moving average.  However, it is still within striking distance of the 10-12 price level which offers good value as portfolio insurance.

The Dow closed [a] above its 100 day moving average, now support, [b] above its 200 day moving average, now support, [c] back below the upper boundary of its short term trading range {15431-17758}, negating Friday’s break, [c] in an intermediate term trading range {15842-18295} and [d] in a long term uptrend {5471-19343}.

The S&P finished [a] above its 100 day moving average, now support, [b] above its 200 day moving average, now support, [c] within a short term trading range {1867-2081}, [d] in an intermediate term trading range {1867-2134} and [e] in a long term uptrend {800-2161}. 

The long Treasury rose slightly, closing within a very short term uptrend, above its 100 day moving average and above a Fibonacci support level.  It continues to strengthen its support base.

GLD declined again, finishing within a very short term downtrend and below a key Fibonacci support level and continuing a consolidation process.

Bottom line:  while the indices back off a bit yesterday, there was little in the pin action to suggest any loss of upward momentum.  My assumption remains that they will challenge their all-time highs; but they are now in very congested territory (multiple resistance levels).  So I would expect the momentum of this up move to slow.

            Crude loses key technical support (medium):

            Update on stock performance in presidential election year (short):



            One datapoint yesterday: February factory orders declined more than anticipated.  This comes on the heels of the Fed’s over-the-weekend revision of industrial production stats---which gives us two big turds in what had been a two week improvement in the industrial sector number’s punch bowl.  Clearly, this keeps the economic outlook murky at best and trending toward recession at worse.

            ***overnight, the Bank of India lowered key rates, February German factory orders declined, most major EU countries’ March services PMI declined, a governor of the Bank of Japan reiterated the potential for further monetary ease.

Bottom line:  the economy continues to underperform while stocks outperform.  The nexus of the conundrum could very well come in the about-to-start quarterly earnings season.  Even if it doesn’t, I believe that there is very little return to be had in equities from paying today’s prices.  If you can’t resist buying, please don’t do it on margin.  You would be asking to get your head handed to you. 

Hopefully, you will find some value in my admonition to build some cash reserves by (1) selling a portion of your winners.  Their position size has almost certainly grown to   level larger than is normal for your portfolio (2) and/or getting rid of your losers.  If a stock can’t do well in the current market environment, what do you think will happen if the S&P returns to our Fair Value [1538]? 

            David Stockman on Yellen’s speech (medium and a must read):

                The impact of the Bank of Japan’s negative interest rate policy (medium):

            Update on market valuation (medium):

       Investing for Survival
            Dividends beat buybacks.

    News on Stocks in Our Portfolios

   This Week’s Data

            February factory orders fell 1.7% versus expectations of down 1.6%.

            The February US trade deficit was reported at $47.1 billion versus estimates of $46.2 billion.





            More on the Greek bailout talks (medium):
            ISIS in Europe (medium):

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