Tuesday, September 20, 2016

The Morning Call--Please, not another Fed week

The Morning Call


The Market

The indices (DJIA 18120, S&P 2139) were off slightly yesterday.  Volume was very low; breadth weak.  The VIX rose 1 ¼%, bouncing off its 100 day moving average. This is not a positive sign for stocks.  However, as long as it remains in a short term downtrend, the implications are not ominous.

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 {17962-19696}, [c] in an intermediate term uptrend {11402-24229} 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 {2144-2350}, [d] in an intermediate uptrend {1941-2543} and [e] in a long term uptrend {862-2400}. 

The long Treasury (134) declined fractionally, remaining well within short term, intermediate term and long term uptrends.  However, it has negated a very short term uptrend and fallen below its 100 day moving average.  That suggests the potential for further weakness though the trend to lower rates will remain intact until the short term uptrend (126) is broken.

GLD was up, but confirmed the break of its short term uptrend, resetting to a trading range.  However, it bounced off its 100 day moving average and a key Fibonacci level.  I am interpreting this as a hopeful sign and continue to Hold the GDX position---but my finger is on the trigger.

Bottom line: while the Averages have experienced a bit of weakness, nothing has occurred that would suggest any change of trend.  The assumption remains that the indices will challenge the upper boundaries of their long term uptrends.


            It was a slow day for economic news.  Nothing overseas and only one minor datapoint in the US: the September housing index was well above estimates.  However, I don’t think means a lot when viewed in the light of last three weeks of poor stats.
            Overnight, Chinese loan demand drops to all-time low.

            Central banks will probably control the headlines this week as our own FOMC and the Bank of Japan both meet to contemplate their respective navels.  In the US, investors will likely be treated with another of those ‘one the one hand, on the other hand’ narratives whose bottom line will be no action today but just wait till tomorrow because the economy is continuing to improve.  Gosh only knows how they can keep a straight face as they mouth such rubbish.

            In Japan, investors are being promised a thorough examination of policies with a hint that something bigger and better could be forthcoming.  However, given the extent of Japanese QE, about the only thing bigger and better would be tender offer from the Bank of Japan for the entire Japanese economy.

            Mohamed El Erian waxes poetic about the mess the central banks have created for themselves (medium):

            Another factor that will be in play this week is the financial system. (Remember this is one of our major economic risk factors.)  While I was gone, Deutschebank got fined $14 billion and a scandal broke at Wells Fargo for unauthorized activity in customer accounts.  I bring this up because the CEO of Wells is due to testify before congress this week.  The point here being that this is not going to enhance the public confidence in our banking institutions.

                        Italian PM unloads on Deutschebank problems (medium):

            Bottom line: the central banks continue to be the nemesis of the global economy.  They have engaged in an unprecedented level of monetary expansion in the name of stimulating growth---a policy that has failed miserably.  They are now stuck with inflated balance sheets, moribund growth but grossly mispriced assets; and they have no clue how to normalize monetary policy without trashing global securities markets.  So they obfuscate and pray for a miracle.  That is likely all that is going to occur this week---more obfuscation and more prayers but nothing of substance to correct the miscarriage of central bank policy.

            The lessons bubbles teach us (medium):

            The latest from John Hussman (medium):
            My thought for the day:  Investors tend to want conditions to remain unchanged.  They do so in part because they are averse to recognizing problems (losses). They stick with a broker even though his recommendations haven’t worked; they hold on to a stock even though it has failed to meet their original objective; they don’t make changes in their asset allocation even though the original assumptions for the allocation are no longer valid.  A dangerous mindset in a changing world.

       Investing for Survival
            The value of rebalancing and diversification.
    News on Stocks in Our Portfolios

   This Week’s Data

            The September housing market index came in at 65 versus expectations of 60.

            August housing starts fell 5.6% versus estimates of a decline of 1.7%; building permits dropped 1.1% versus forecasts of a 1.3% increase.




  International War Against Radical Islam

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

No comments:

Post a Comment