Friday, June 10, 2016

The Morning Call---A slow week for the numbers

The Morning Call


The Market

The indices (DJIA 18985, S&P 2115) rested yesterday as they toy with an overbought condition but showed little sign of any kind of dramatic reversal. Volume fell again; breadth strengthened but as noted above it has reached overbought territory.  The VIX rose 4% closing within a short term trading range and below its 100 day moving average. 

The Dow ended [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 closed [a] above its rising 100 day moving average, now support, [b] above its 200 day moving average, now support, [c] above the upper boundary of its short term trading range for the third day, resetting to an uptrend {2077-2300}, [d] in an intermediate term trading range {1867-2134} and [e] in a long term uptrend {830-2218}. 

The long Treasury was up, finishing above the upper boundary of its intermediate term trading range; if it remains there through the close next Tuesday, it will reset to an uptrend.  It also ended above its 100 day moving average and well within a short term uptrend.

GLD rose again, ending well above its 100 day moving average and the lower boundary of its short term trading range.

Bottom line:  even though stocks closed down, it was not particularly surprising in that they had gotten overbought; so some retreat was to be expected.  Further, what weakness did occur was pretty puny, witness the S&P resetting to an uptrend despite being off on the day.  So while the pin action in the VIX remains somewhat confusing, the buyers still clearly control the board.  I think that the assumption has to be that that the Averages will probably challenge the upper boundaries of their intermediate term trading ranges and even possibly the upper boundaries of their long term uptrends.  However, I don’t think that they will be successful.



            Another slow day for economic data: weekly jobless claims were lower than expected and April wholesale inventories and sales were better than forecast.  That leaves us on Friday morning before the opening in the same position as last week---no clear trend in the numbers; but unlike last week there are only two indicators to be released today and neither are especially important.
            How much debt did the US incur to support first quarter growth (short)?

            Overseas, the important news wasn’t data (though Japanese machine orders fell substantially) but the gathering dissent over central bank monetary policy, i.e. the Japanese opposition party demanded an end to negative interest rates and Deutsche Bank hammered the ECB and its ‘whatever it takes’ policy.  (remember earlier the largest Japanese bank withdrew as primary dealer of government bonds).   At this point, it is too early to tell if this is the beginning of the decline in central bank credibility.  Clearly that would fit my outlook; but we need more action to know if this trend is real.

            Fed speak---lost in translation (medium):

Bottom line:  the central banks are starting to take some scata from their constituents.  While people like me have been complaining forever, the establishment has played along with script---at least until now.  This may be nothing more than a temporary fit of pique; but if it gathers steam, then my long expected ‘emperor’s new clothes’ moment may be upon us.   I have shown beyond a shadow of a doubt that I have no clue when the current mispricing of assets ends; but I am willing to wait to avoid getting hammered.

My thought for the day: I harp constantly on minimizing fees (mutual fund load, advisors fees, commissions, management fees, performance fees) because they cost you in terms of long term performance.  That is the conclusion of every study that I have ever seen.  Just think about docking your portfolio 1-3% annually and compounding that over 20 or 30 years. The number is huge.  And it is worse for smaller accounts.  Not only are the fees higher as a percent of the amount of money invested but they tend to get a lot lower quality of service.  Who’s the client the portfolio manager going to spend time on, one with $10 million or one with $500,000?

That is why I argue the smaller individual investor should either have a portfolio of ETF’s (if they want to play golf and not worry about their investments) or find a simple strategy that involves a minimum amount of trading (if they want to pay closer attention to their portfolio).  That was the purpose behind creating the Investing for Survival website---to provide the research and portfolio strategy help for the small investor and a very low price.

       Investing for Survival
            The upside to academic finance (medium):

    News on Stocks in Our Portfolios

   This Week’s Data

            April wholesale inventories rose 0.6% versus expectations of up 0.1%; sales increased 1.0%.


            Quote of the day (short):

            Are Brexit fears overblown? (medium):



FBI leaks on the Hillary email scandal (medium):

  International War Against Radical Islam

            Thoughts on defeating ISIS (medium):

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