Wednesday, October 19, 2016

The Monring Call--Short term, the Market remains directionless

The Morning Call


The Market

Yesterday, the indices (DJIA 18161, S&P 2139) rebounded, though volume fell. Breadth improved somewhat.  The VIX was down 6%, but still closed above its 100 day moving average (support) and in a very short term uptrend.  However, it finished below its 200 day moving average (now resistance) and in a short term downtrend.  At the moment, it continues to struggle for direction.

The Dow ended [a] below its 100 day moving average, now resistance, [b] above its 200 day moving average, now support, [c] in a short term trading range {17092-18693}, [c] in an intermediate term uptrend {11503-24348} and [d] in a long term uptrend {5541-19431}.

The S&P finished [a] below its 100 day moving average, now resistance, [b] above its 200 day moving average, now support, [c] in a short term trading range {1995-2193}, [d] in an intermediate uptrend {1964-2566} and [e] in a long term uptrend {862-2400}. 

The long Treasury was up, closing below its 100 day moving average (resistance), within a very short term downtrend, but bounced back above a key Fibonacci level. It remained within short term, intermediate term and long term uptrends.  TLT’s chart is still healthy but seems to be developing heartburn.

GLD also rose, but ended below its 100 day moving average (resistance) and in a short term downtrend.  However, it finished right on its 200 day moving average and on a key Fibonacci level.  It is trying to stabilize after a rough couple of months.

Bottom line: the Averages bounced yesterday; however, they tested their 100 day moving averages (now resistance) and were not successful.  This pin action continues to suggest turmoil around an inflection point.



            Yesterday’s economic numbers were mixed: the October housing index and September CPI were in line while CPI ex food and energy was below estimates and month to date retail chain store sales improved over the prior week.

            Obama takes another economic victory lap (medium):

            Update on big four economic indicators (medium):

            The economy is straining from too much debt (medium):

            Overseas, only one minor stat: the September UK CPI was above expectations.

            ***overnight, September UK unemployment was reported at 4.9%, in line; third quarter Chinese GDP growth came in at 6.7%, also  in line; with industrial production was less than expected and retail sales in line, growth was driven by increased government spending, record bank lending and a red hot property market.

            Two other items on investors’ minds:

(1)   third quarter earnings reports have improved after a rough start; however, it is too soon to discern a trend,

(2)   the Fed and the potential December rate hike.

Yellen’s latest speech---we don’t know what we are doing (medium and a must read):

            Nine regional Fed chiefs are asking for a rate hike (medium):

Bottom line:  the picture remains fuzzy regarding the economic data, the trend in third quarter earnings reports, the direction of central bank monetary policy, the economic consequences of a Brexit and an OPEC production cut.  As long as clarity is lacking, the Market is apt to churn directionlessly.  If you haven’t already, take the opportunity to build your cash position by lightening up on your winners and selling your losers.

            An interview with Jim Grant (medium):

            My thought for the day:  let your profits run.  That is an old, well-worn adage; but it is true.  If you own one great growth company and own it long enough, the gains will more than offset mediocre results from other stocks in your portfolio.  That is part of the reasoning behind our Sell Half Discipline.  Take some money off the table; but never Sell all of a stock whose underlying company continues to meet the qualifications for inclusion in our Universe.  A great example is the Dividend Growth Portfolio’s holding of CR Bard.  From an original investment of $30,000, I Sold Half when BCR hit that threshold but subsequently have accumulated an additional $100,000 in profits to date.

       Investing for Survival
            Understanding non GAAP earnings.

    News on Stocks in Our Portfolios
Sherwin Williams (NYSE:SHW) declares $0.84/share quarterly dividend, in line with previous.


   This Week’s Data

            Month to date retail chain store sales improved from the prior week.

            The October housing market index came in at 63.0, in line.

                Weekly mortgage applications rose 0.6% while purchase applications were up 3.0%.

            September housing starts fell 8.9% versus expectations of an increase of 3.3%; permits were up 6.3% versus estimates of up 2.2%.


            Trump on trade (medium):

            You can’t cure unemployment by trying to stop technological advances (medium):

            Brexit---winners and losers (medium):

            Accounting for healthcare inflation (medium):



Update on FBI investigation of Clinton (medium):

  International War Against Radical Islam

            A new cold war---but worse (medium):

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