Friday, August 12, 2016

The Morning Call--Finding a reason to buy stocks

The Morning Call


The Market

The indices (DJIA 18613, S&P 2185) rose yesterday, making new highs.  Volume was up; breadth was stronger.  The VIX (11.8) fell 3.0%, ending below its 100 day moving average, within a short term downtrend and an intermediate term trading range (10.3). 

The Dow closed [a] above rising 100 day moving average, now support, [b] above its 200 day moving average, now support, [c] within a short term uptrend {17535-19271}, [c] in an intermediate term uptrend {11312-24139} 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 {2056-2295}, [d] in an intermediate uptrend {1917-2519} and [e] in a long term uptrend {862-2246}. 

The long Treasury fell, but ended above its 100 day moving average and well within very short term, short term, intermediate term and long term uptrends.  However, it continues to trade within a developing pennant formation (breaking that pattern should provide directional guidance on bond prices).

GLD declined, finishing above its 100 day moving average and within short term and intermediate term uptrends.

Bottom line: so much for a quiet Market.  Investors appeared buoyed by a surge in oil prices which have had an on again, off again correlation with stocks for the last couple of years.  Now it seems to be on again, driven apparently by the Saudi’s agreeing to yet another meeting at which production quotes will be on the agenda.  If stocks were up because of that, investors need to carefully re-read history.  The Saudi’s have said time and time again their strategy is to take market share and time and time again have conducted policy as such.  I am not sure how many OPEC meetings there have been in last year at which investors and other OPEC members have anticipated production cuts; but there have been enough for investors to know better.  Nothing changed after any of them.  I think that it is reasonable to expect the same result this time. 

Still, it was a good excuse to get the juices flowing after a dull couple of weeks.  The question, as it has been for every big move of since mid-July, is will there be any follow through?  So far the answer has been, no.  Of course, the indices did make a new high, so that does suggest that the Market has an upward bias.  However, I remain bothered by the continuing volatility in the VIX and the bond, gold, oil and currency markets which suggest that something is amiss. 
            Companies may be buying back their own stock, but the managers (insiders) aren’t (short):



            Yesterday’s US economic data was negative: July import/export prices (with revisions) were a wash, weekly jobless claims fell less than expected and the July US Treasury budget deficit was horrible.

            More signs of recession (medium):

            It was not much better overseas.  July UK existing home sales declined and tensions in Ukraine heightened.  In addition, the South Korean central bank left key rates unchanged.

            ***overnight, July Chinese retail sales, industrial production and fixed investment were all below expectations: a UBS report stated that China is making progress dealing with its huge nonperforming loan problem; first quarter German GDP was stronger than estimates, while Italian GDP was weaker; second quarter EU flash GDP rose 0.3%, in line.

Bottom line: since nothing good can be gleaned from above, I assume that investors just decided to put on the buying cap and go for it.  After all, it has been quiet for too long; so if no good reason appears to buy, just make one up and fill out your tickets. 

 Investors should use this situation to take some money off the table, either selling a portion of the positions in their winners or all of their losers or both.

            My thought for the day: at a time when your bank/broker is paying you nothing for your cash and you can barely get a positive return on short term money, reducing you credit card balances on which you are being charged 10-18% is a great fixed income investment.

       Investing for Survival
            Experts and the future.

    News on Stocks in Our Portfolios
C.H. Robinson Worldwide (NASDAQ:CHRW) declares $0.43/share quarterly dividend, in line with previous.

Nike (NYSE:NKE) declares $0.16/share quarterly dividend, in line with previous.


   This Week’s Data

            July PPI fell 0.4% versus expectations of a 0.1% rise; ex food and energy, it dropped 0.3% versus estimates on +0.2%.

            July retail sales were flat were forecasts of +0.4%; ex autos, it was -0.3% versus consensus of +0.2%


            Apparently, the primary explanation (I should have known this but failed to pick up on it) for the recent big revisions in the economic data was the periodic rationalization by the Bureau of Labor Statistics of contemporary reported data with a more seasoned version gleaned from (1) a more complete set of numbers [many stats are reported without having all the component data], (2) as well as the ability to look back at all completed data series and adjust out the obvious inconsistencies.   That helps explain how those temporary ‘seasonal’ first quarter datapoint adjustments got washed out.

                More central bank confusion (medium):



Obamacare on the verge of collapse (medium):

  International War Against Radical Islam

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