Wednesday, September 21, 2016

The Morning Call---Waiting for new material

The Morning Call


The Market

The indices (DJIA 18129, S&P 2139) were basically flat yesterday.  Volume was even lower than on Monday; breadth remained weak though improved slightly.  The VIX rose 2 ½%, closing above its 100 day moving average and making a third higher low. 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 a rising 100 day moving average, now support, [b] above its 200 day moving average, now support, [c] within a short term uptrend {17971-19705}, [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 {2114-2350}, [d] in an intermediate uptrend {1943-2545} and [e] in a long term uptrend {862-2400}. 
The long Treasury (134) was up, finishing well within short term, intermediate term and long term uptrends.  While, it closed below its 100 day moving average, now resistance, it also remained above a key Fibonacci level.  That leaves open the possibility for some additional price weakness though the trend to lower rates (higher prices) will remain intact until the short term uptrend (126) is broken.

GLD was up, ending in a short term trading range and above its 100 day moving average (support) 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: investors remained on the sidelines yesterday awaiting the results of today’s FOMC and Bank of Japan meetings.  As I noted in yesterday’s Morning Call, I am not expecting anything dramatic.  If that is the case, the assumption remains that the indices will challenge the upper boundaries of their long term uptrends.


            The US economic dataflow continued its weak performance: August housing starts and building permits were well below projections and month to date retail chain store sales slowed.

            Certainly, these numbers are a continuation of the grim economic data released in the last three weeks. So it seems highly unlikely that rates will be increased at today’s Fed meeting.  About the only question is how deep the bullsh*t gets in the post meeting statement and in Yellen’s subsequent press conference.

David Stockman on the Fed---again (medium):

            Another point on how the Fed has gotten it so wrong (medium):

            Overnight, Chinese loan demand dropped to all-time low---and there is a good reason.  A rather long in depth look at China’s debt problem (long):   

            Bottom line: it seems a waste of time to pound the central banks in advance of their meetings today when I can wait and include any new material that may flow forth during those meetings. 

           ***overnight, the BOJ held rates steady at -0.1% following its latest  meeting, but announced that it would modify its policy framework, marking the latest attempt to boost prices and goose economic growth.  Among the changes, the BOJ said that it would introduce yield curve controls, eliminate the maturity range of purchases, abandon its monetary base targets and confirmed that cutting rates further remained an option.

I would include that yesterday’s housing data does not help the overall outlook for the economy.  Indeed, the Atlanta Fed just released its newest revision for third quarter GDP growth; and not surprisingly it was down.  That is likely to weigh on the FOMC members. 

Update on the Atlanta Fed’s third quarter GDP estimate (short):

But remember, I think that rates should be raised because (1) they will not likely have any detrimental effect on the economy and (2) they will be a step towards normalizing asset pricing and allocation. 

                My thought for the day:  Accepting or rejecting an argument is generally based on how well it fits your pre-defined beliefs, rather than the objective facts of the situation.  Pointing out the lack of economic progress that has resulted from QE is met with suspicion by those who believe the Federal Reserve's actions benefit growth.

       Investing for Survival
            Seven crucial lessons people learn too late in life (medium):
    News on Stocks in Our Portfolios

General Mills (NYSE:GIS): FQ1 EPS of $0.78 beats by $0.02.
Revenue of $3.91B (-7.1% Y/Y) misses by $10M

   This Week’s Data

            Month to date retail chain store sales grew slower than in the prior week.

            Weekly mortgage applications fell 7.3% while purchase applications were down 7.0%.

            The OECD lowered its 2017 global growth forecast to 2.9%, the lowest rate since the financial crisis.



  International War Against Radical Islam

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