The Morning Call
10/19/16
The
Market
Technical
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.
Fundamental
Headlines
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
Economics
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%.
Other
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):
Politics
Domestic
Update on FBI
investigation of Clinton (medium):
International War Against Radical
Islam
A
new cold war---but worse (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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