The Morning Call
12/6/16
The
Market
Technical
The indices’
(DJIA 19216, S&P 2204) pin actions were back in parallel, advancing nicely. Volume exploded; breadth strengthened,
keeping it at what has become a persistently overbought level. The VIX (12.2) got whacked 13 ½%, pushing it
back below its 200 day moving average and remaining below its 100 day moving
average and within a short term downtrend. It is closing in on the lower boundary of its
intermediate term trading range (10.38).
The Dow ended
[a] above on its 100 day moving average, now support, [b] above its 200 day
moving average, now support, [c] in a short term uptrend {18127-20187}, [c] in
an intermediate term uptrend {11575-24425} and [d] in a long term uptrend
{5541-20148}.
The S&P
finished [a] above its 100 day moving average , now support, [b] above its 200
day moving average, now support, [c] within a short term uptrend {2113-2455},
[d] in an intermediate uptrend {1996-2598} and [e] in a long term uptrend {881-2419}.
The long
Treasury (119.5) fell fractionally, closing below its 100 day moving average
(now resistance), below its 200 day moving average (now resistance), below a
key Fibonacci level and in a very short term downtrend. It remains poised to challenge the lower
boundary of its short term trading range (117.3) and the lower boundary of its
intermediate term trading range (115.3).
GLD also
declined slightly, taking it back below the Fibonacci level it pushed through last
Thursday and remaining below its 100 day moving average (now resistance), below
its 200 day moving average (now resistance) and below the lower boundary of its
short term downtrend.
The dollar took
a big hit, finishing below the upper boundary of its former short term trading
range. It would appear that its recent
challenge of that boundary is over for the time being. However, it is still in a strong very short
term uptrend and well above its 100 and 200 day moving averages.
Bottom line: the
Averages had a harmonious up day.
Actually, I was a bit surprised that they weren’t up more given the huge
volume and the drubbing administered to the VIX. Perhaps that is a function of their extreme
overbought condition---which didn’t corrected itself very much in last week’s
sideways pin action. Technically
speaking, this is going to catch up to the indices at some point; but given
this Market’s current propensity to interpret everything positively, when that
occurs is anyone’s guess. But it is a
sign of underlying momentum and suggests that a challenge of the upper boundaries
of both indices long term uptrends is in our future.
Fundamental
Headlines
Yesterday’s
US data was mixed: the November Markit services PMI was less than expected
while the November ISM nonmanufacturing index was better.
***overnight,
the IMF and EU finance ministers failed to reach an agreement on a Greek
bailout; November German industrial orders rose at the fastest pace in two
years.
The
big news item was this weekend’s Italian referendum negative vote. Many, including yours truly, speculated that
a ‘no’ vote had adverse implications for that country’s very weak banking
system. But like the Brexit, investors either
weren’t disturbed at all or had somehow discounted the vote.
Italian
bank told to prepare for a bailout this weekend (medium):
Bottom line: we
have apparently reached a new age in which it is no longer necessary to worry about
events that could have a deleterious on the economy or their impact on
valuations. Everything is and will
forever be awesome. In those
circumstances, the most logical investment strategy is to load up on stocks and
go the beach.
The only
argument I have to counter that is that I have been here before and that strategy
has always ended badly for those who pursued it. I
should add that I had no more clue when it would end then as I do now. What I will suggest is that any stock bought
today will be much lower when this euphoric period is over than it is
now---irrespective of how much higher the stock goes in the short term. If you think that you are smart enough to buy
now and get out before mean reversion occurs, go for it. I am not that smart; so my focus is on
selling a portion of the stocks that have been big winners and all my losers.
I
am not the only one confused (medium):
My
thought for the day: there is no free lunch.
When you start thinking that investing is easy, that you can’t lose,
that this time is different, grab dates and run because the waitress is coming
with the check and it’s bigger than you think.
Investing for Survival
When
I was a boy.
News on Stocks in Our Portfolios
Economics
This Week’s Data
The
November Markit services PMI was reported at 54.6 versus the October reading of
54.8.
The
November ISM nonmanufacturing index came in at 57.2 versus expectations of
55.5.
The October US trade
deficit was $42.6 billion versus estimates of $42.0 billion.
Revised
third quarter nonfarm productivity rose 3.1% versus consensus of up 3.3%; unit
labor costs were up 0.7% versus projections of up 0.3%.
Other
Fed’s
labor market conditions index continues soft (short):
Trump,
congress and trade (medium):
Trump
advisor says that Trump is not going to rip up NAFTA (medium):
A
crisis in need of a taxpayer (medium):
Speaking
of which, Belgium is now enforcing a ‘dance’ tax (short):
Rise
in EU breakup odds (short):
Evidence
of a rebounding global economy (medium):
Politics
Domestic
The next
iteration of snowflake demands (short):
International War Against Radical
Islam
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for Survival’s website (http://investingforsurvival.com/home)
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