Wednesday, June 15, 2016

The Morning Call--Changing trends

The Morning Call


The Market

The indices (DJIA 17674, S&P 2075) continued weak, though they managed to close off the lows of the day. Volume decreased.  Breadth weakened.  The VIX was off slightly, but still finished well above its 100 day moving average for the third day reverting from resistance to support. 

The Dow closed [a] above its rising 100 day moving average, now support, [b] above its 200 day moving average, now support, [c] within a short term trading range {17498-18726}, [c] in an intermediate term trading range {15842-18295} and [d] in a long term uptrend {5541-19413}.

The S&P finished [a] above its rising 100 day moving average, now support, [b] above its 200 day moving average, now support, [c] within a short term trading range {2037-2110}, [d] in an intermediate term trading range {1867-2134} and [e] in a long term uptrend {830-2218}. 

The long Treasury fell fractionally, ending above the upper boundary of its intermediate term trading range for the fourth day, resetting to an uptrend.

A history of bund yields (short):

GLD (122.8) was up.  It is now well above the lower boundary of its short term trading range and its 100 day moving average and is nearing the upper boundary of its short term trading range (124.2).  Resting right above that boundary is the upper boundary of its intermediate term trading range.  So clearly, GLD has a lot resistance to overcome near term.  If it breaks above these boundaries, it is apt to either take a lot of work or a significant unexpected negative event.

Bottom line: the bulls tried to stem the bloodletting yesterday.  I will give them a ‘C’ for effort.  Whether they or the bears can prevail near term in the face of numerous economic releases, the Fed meeting, Friday’s expirations and the Brexit is a difficult call.  Best to do nothing---unless you want to take profits.

The latest from JP Morgan’s quant guru (medium):

The TLT reset its intermediate term trend to up.  Can it hold?



            Yesterday’s US data were generally upbeat: the May small business optimism index was stronger than expected; May retail sales (a primary indicator) were higher than anticipated, though ex auto’s they were in line; month to date retail chain store sales slightly improved from the prior week; April business inventories grew less than estimates, but sales were much better.  Score it for the good guys.  Nothing from overseas.

            ***overnight, UK unemployment fell to an eleven year low.

            The Fed and Brexit remained in the forefront of the news flow.  It seems that there is general agreement on the Street that the Fed will do nothing today; though concerns remain about the narrative in the Fed statement.  The Brexit is another matter with varying opinions on both the results and the consequences.  I have no clue.  However, as longer as uncertainty reigns, I would expect continuing volatility in equity prices.  That said, if the Market maintains its downward course, the question will become when will a Brexit be reflected in price?

            The latest from Doug Kass (medium):

            The latest from John Hussman (medium):

            The latest from Jeff Gundlach (medium):

            The low interest rate trap (medium):

            My thought for the day: Much has been written about the two dominant emotions that plague investors: fear and greed.  At the moment, stock prices are in the ‘greed’ camp.  It manifests itself by being willing to pay any price regardless of the underlying company’s fundamental.  Excitement over a new product, technology, etc. or an endless supply of free money persuades the investor that he/she must own stock for fear of losing out. 

There are ways to protect yourself from this portfolio crippling disease.

(1)   remember that your portfolio doesn’t know what it doesn’t own.  In other words, there is no loss from not owning a stock that may increase in value.  Your time is much better spent focusing on those stocks that you do own.  That is where your portfolio’s gains and loses come from.

(2)   embrace a Price discipline.  I have dwelled on this subject too often to warrant saying any more.

(3)   if you just can’t help yourself, set aside a small portion of your portfolio as play money and go chase those dream stocks.  If you are right, then your portfolio is ahead.  If you are wrong, you haven’t done much damage.

       Investing for Survival
            Eleven signs that you own the right portfolio:
    News on Stocks in Our Portfolios

   This Week’s Data

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

            April business inventories were up 0.1% versus expectations of up 0.2%; but sales rose a robust 0.9%.

            Weekly mortgage applications fell 2.4% while purchase applications were down 5.0%.

            May PPI came in up 0.4% versus estimates of up 0.3%; ex food and energy it was up 0.3% versus forecasts of up 0.2%,

            The June NY Fed manufacturing index was reported at 6.01 versus consensus of -3.5.


            CBO study on who pays taxes and how much (medium and a good read):

            BofA’s global stress index (short):

            More on student debt (short):



  International War Against Radical Islam

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