The Morning Call
8/17/16
The
Market
Technical
The indices
(DJIA 18552 S&P 2178) backed off yesterday. Volume continued low and breadth weakened. The VIX jumped 7%, finishing below its 100
day moving average, within a short term downtrend but still close to the lower boundary
of its intermediate term trading range (support). It still did not regain the lower boundary of
its former short term trading range.
The Dow ended
[a] above rising 100 day moving average, now support, [b] above its 200 day
moving average, now support, [c] within a short term uptrend {17583-19319}, [c]
in an intermediate term uptrend {11316-24143} and [d] in a long term uptrend
{5541-19431}.
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 uptrend {2061-2300}, [d]
in an intermediate uptrend {1917-2519} and [e] in a long term uptrend {862-2400}.
The long
Treasury declined. While it ended above
its 100 day moving average and well within very short term, short term,
intermediate term and long term uptrends, it fell below the lower boundary of the
developing pennant formation---a sign that rates could move further to the
upside; or a reaction to Dudley’s speech (see below).
And:
GLD rose on
volume, ending above its 100 day moving average and within short term and intermediate
term uptrends. However, last week’s
failed second try to surmount a key Fibonacci level and voiding of a very short
term uptrend, leaves me concerned about our GDX holding.
Bottom line: the
Averages took a tumble, seemingly on some hawkish statements from NY Fed chief
Dudley; though little technical damage was done. So I continue to believe that a challenge of
the upper boundaries of their long term uptrend is highly likely. That said, I still
think that the pin action in the VIX and the bond, gold, oil and currency
markets is indicating that something is amiss.
Be careful.
Fundamental
Headlines
Yesterday’s
US economic data was weighted to the positive: month to date retail chain store
sales were off, July CPI was unchanged, though ex food and energy is was a
little hotter than expected, July housing starts (primary indicator) were
better than estimates but building permits were less and July industrial
production (primary indicator) was stronger than anticipated and capacity utilization
inched higher.
Overseas,
July UK CPI rose.
The
big news of the day was NY Fed head Dudley’s more hawkish comments which
included that September was still on the table for a possible rate rise. Why investors are still listening to these
guys is beyond me---(1) the election is two and a half months away and there is
no way the Fed is going to risk upsetting the Market ahead of that event, (2)
yesterday’s improved housing and industrial production numbers notwithstanding,
the dataflow has not been good and there have been several recent serious downward
revisions in previously positive datapoint; so it is not clear at all that the
economy is as strong as Dudley suggests.
And that says nothing about the endless stream of discouraging global stats.
Just to
reiterate an oft made point: I hope the Fed does raise rates and I don’t think
that the increase will be bad for the economy.
I just think that the Fed is too chickens**t to do it.
As one might
expect, this didn’t help any Market. But
less we forget, the FOMC releases the minutes from its latest meeting today and
it could be that Dudley’s hawkish statements were just a set up for a dovish
FOMC narrative to goose stock prices again.
Yeah, I know I am a cynic.
However, irrespective of how the FOMC minutes read, Dudley’s comments only
make sense in the context of an indecisive and likely frightened Fed.
And:
Lord
Rothschild weighs in on central bank monetary policy (medium):
Bank
of Japan buying sends Nikkei to new highs (medium):
Bottom line: the
bad news is that the Fed is clueless, has no idea how it is going to extract
itself from its self-imposed monetary dilemma and draws ever nearer to losing
what little credibility it has left---which likely not be good for the Market. The good news is that the Fed is clueless,
has no idea how it is going to extract itself from its self-imposed monetary
dilemma and draws ever nearer to losing what little credibility it has
left---which hopefully means that we are closer to the rational pricing and
allocation of assets.
In the meantime,
sit back and enjoy the part of your portfolio that is invested; but consider
taking some money off the table, either selling a portion of the positions in your
winners or all of your losers or both.
What
bubble? (medium):
The
illusion of stock buybacks (medium and a must read):
Investing for Survival
The
margin of danger.
News on Stocks in Our Portfolios
Economics
This Week’s Data
July
industrial production rose 0.7% versus forecasts of +0.3%; capacity utilization
came in at 75.9 versus estimates of 75.5.
Weekly mortgage
applications fell 4.0% as did purchase applications.
Other
Dividend
cuts point to recession (short):
Update
on big four economic indicators (medium):
As
long as we are worrying about stuff, add this to your list (medium):
Politics
Domestic
International
An
initial look at the hacked emails of George Soros (medium):
The Brexit didn’t end it (medium):
Visit Investing
for Survival’s website (http://investingforsurvival.com/home)
to learn more about our Investment Strategy, Prices Disciplines and Subscriber
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