Tuesday, August 16, 2016

The Morning Call--Good news and bad news

The Morning Call


The Market

The indices (DJIA 18636 S&P 2190) rose again. While breadth improved, volume remained quite low.  The VIX was up 2 ¼% (unusual of an up Market day), 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).

Shorts throw in the towel (short):

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 {17574-19310}, [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 fell 1%, ending above its 100 day moving average and well within very short term, short term, intermediate term and long term uptrends.  However, it remained within the developing pennant formation---this time near the lower boundary.

GLD rose, ending above its 100 day moving average and within short term and intermediate term uptrends.  However, last week it failed at its second try to surmount a key Fibonacci level, then negated a very short term uptrend.  That has me concerned about our GDX holding.

Bottom line: the Averages have lifted out of that late July to mid-August trading range.  A challenge of the upper boundaries of their long term uptrend would appear to be an inevitability. That said, I still think that the pin action in the VIX and the bond, gold, oil and currency markets are indicating that something is amiss.  Be careful.
            Bearish divergence (short):

Update on who is buying stocks (medium):



            Yesterday’s US economic news remained in the negative: the August NY Fed manufacturing index was very bad while the August housing index was in line with estimates.

            Overseas, we received yet more proof that QE is nothing more than a central banker wet dream as the Japanese second quarter GDP and corporate investment were below forecasts.
            Negative yielding debt now totals $13.4 trillion (medium):

            ***overnight, the July UK CPI rose.

            In addition, there was more news (hope) of some sort of new oil production proposal as the Russians and Saudi’s have agreed to meet.  Good luck.

Bottom line: the good news is that the global economic dataflow remains crappy so central bank tightening is off the radar.  The bad news is that the global economic dataflow remains crappy and sooner or later somebody is going to whisper the R word.  I am not sure what that magic word is in algo land; but once it makes its appearance, look out below. 

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.

            The latest from John Hussman (medium):

            David Tepper’s latest portfolio moves (short):

            Is the reach for yield morphing into a flight to quality (medium)?
            The BIS issues another blistering report on the negative consequences of artificially low rates (medium):
            My thought for the day.  When everyone’s bullish, it’s hard to sell stocks that have been good to your portfolio, especially if the allocation of those proceeds will go in to an extremely low return alternative (cash).  To be fair, there is a reasonable basis for that hesitation.  After all, Markets are supposedly efficient; so it is only natural to think that if cash was such a great investment, everyone would be buying it.  My argument isn’t that one should be a contrarian for the sake of being at odds with the crowd bias.  Rather it is that there are benefits to taking profits and redeploying them into unloved assets.  To be sure, the timing and price triggers for rebalancing are extraordinarily opaque---witness the timing of our Sell Half Discipline in this latest Market run up.  But remember high valuations translate to low future returns and vice versa.  History proves that to us time and time again.

     Investing for Survival
            How much do you need to save for retirement?
    News on Stocks in Our Portfolios
Genuine Parts Company (NYSE:GPC) declares $0.6575/share quarterly dividend, in line with previous.

Home Depot (NYSE:HD): Q2 EPS of $1.97 in-line.
Revenue of $26.47B (+6.6% Y/Y) in-line
Praxair (NYSE:PX) +3.3% AH following a Dow Jones report that it has held merger talks with Germany's Linde (OTCPK:LNAGF), in a deal that would create the world’s largest industrial gas supplier with more than $30B in annual revenue.


   This Week’s Data

            The August housing market index came in at 60, in line.

            Month to date retail chain store sales were much softer than the prior week.

            July CPI was flat, in line; ex food and energy, it rose 0.1% versus expectations of up 0.2%.

            July housing starts increased 0.2% versus a forecast of a 0.07% decline’ building permits fell slightly versus an estimate of 0.06% advance.


            Total US consumer debt and its composition (short):

            Mexican labor shortage.  Ah, the irony of it all (medium):

            FDIC slams ‘fortress’ banks’ balance sheets (medium and a must read):



Obamacare sticker shock (medium):

Onward to social justice (medium):

Quote of the day (short):

  International War Against Radical Islam

            What a bunch of worthless turds (medium):

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