Wednesday, September 28, 2016

The Morning Call--Coming attractions: OPEC, Yellen and Draghi

The Morning Call

9/28/16

The Market
         
    Technical

The indices (DJIA 18228, S&P 2159) recovered nicely yesterday after a couple of rough days.  Volume fell but breadth improved.  The VIX dropped 10%, retreating from its 100 day moving average and ending in short term downtrend---which is supportive of stocks.  Nonetheless, it remains in a very short term uptrend. 

The Dow ended [a] back above its 100 day moving average, now support and negated Monday’s break, [b] above its 200 day moving average, now support, [c] within a short term uptrend {18069-19803}, [c] in an intermediate term uptrend {11420-24247} 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 {2126-2362}, [d] in an intermediate uptrend {1946-2548} and [e] in a long term uptrend {862-2400}. 

The long Treasury was up again on volume, ending above its 100 day moving average and well within very short term, intermediate term and long term uptrends.  This extends a very upbeat two week run in prices---suggesting that the odds of a December rate hike are shrinking. 

GLD fell, finishing back below its 100 day moving average and within a short term trading range.  It has now made a fourth lower high---not a plus for our GDX holding.

Bottom line: the DJIA undid Monday’s technical damage, leaving both of the Averages above key momentum indicators and within uptrends across all timeframes.  Support exists at their 100 day moving averages and the lower boundaries of their short term uptrends, resistance at their recent highs (18668/2194).

    Fundamental

       Headlines

            Yesterday’s US economic data was generally upbeat: month to date retail chain store sales and the July Case Shiller home price index were flat; the September Richmond Fed manufacturing index was down but not as much as anticipated; while September consumer confidence and the Markit Services Flash PMI were better than forecast.

Overseas, the World Trade Organization lowered its 2016 estimate for global growth as well as its forecast for 2016 and 2017 global trade; August Chinese industrial profits rose much more than projected.

After four weeks of very poor data, getting some positive news is a relief.  At least we have reason to believe that the economy is not sinking like a stone.  Let’s see how the rest of the week goes before getting too jiggy.

            ***overnight, it was rumored that German financial authorities are preparing a rescue plan for Deutschebank if it is unable to raise the capital to pay the $14 billion US fine; Greek law makers approved another austerity measure that will assure the next bailout funding; and US lawmakers failed to pass a stop gap funding measure to keep the government running.  Today will be a potentially big news day as OPEC wraps up its meeting, Yellen testifies before the House Financial Services Committee and Draghi addresses the German parliament.

            Bottom line: the economic data improved yesterday, though one day in the last four weeks isn’t exactly a reason to jump for joy.  In addition, Deutschbank’s solvency issues remains very much in question, rumors notwithstanding.  As I noted yesterday, there are too many variables bearing on this problem to make any dire predictions.  However, the bank’s financial position is weak enough that having some protection against a big negative event makes sense---especially given the current very generous stock valuations.  With 50-55% cash position, our Portfolios already have that.  However, if you don’t, this Market is giving you a great opportunity to take some money off the table in stocks that have been good performers and/or let your losers go.

More on Deutschebank (medium):

            The latest from John Hussman (medium):

            My thought for the day: people in general tend to overestimate their ability to control their emotions.  As it applies to investors, many consider themselves contrarians who want to buy when the bottom is falling out.  Yet when the Market is nosediving, they panic like everyone else.  I developed our Price Disciplines to help overcome this tendency---when our Model has set a Buy Price when conditions are normal, it helps to reassure me that I am Buying real value when the sky is falling.  The opposite is also true---forcing me to take profits when everything is seemingly coming up roses.

       Investing for Survival

            Bull markets are the hardest part.   


    News on Stocks in Our Portfolios
 
MasterCard (NYSE:MA) declares $0.19/share quarterly dividend, in line with previous.

Nike (NYSE:NKE): FQ1 EPS of $0.73 beats by $0.17.
Revenue of $9.06B (+7.7% Y/Y) beats by $190M

General Mills (NYSE:GIS) declares $0.48/share quarterly dividend, in line with previous.

Economics

   This Week’s Data

            Month to date retail chain store sales were flat with the prior week.

            The July Case Shiller home price index was flat versus expectations of being up 0.1%.

            The September Markit Services Flash PMI came in at 51.9 versus the August reading of 50.9.

            September consumer confidence was reported at 104.1 versus estimates of 98.8.

            The September Richmond Fed manufacturing index came in at -8 versus the prior reading of -11.


                        Weekly mortgage applications fell 0.7% while purchase applications were up 1.0%.

            August durable goods orders were flat versus forecasts of -1.9%, though the July number was revised down substantially; ex transportation, they were down 0.4% versus consensus of -0.5%.

   Other

            Estimated US corporate sales growth is anemic (short):

            More bankruptcies coming in the oil and gas industry (medium):

Politics

  Domestic

Do stocks predict elections (short)?

  International War Against Radical Islam

            Jihadists target Spain (medium):

Visit Investing for Survival’s website (http://investingforsurvival.com/home) to learn more about our Investment Strategy, Prices Disciplines and Subscriber Service.




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