Wednesday, December 14, 2016

The Morning Call--The Market is now the story

The Morning Call


The Market

The indices (DJIA 19911, S&P 2271) moved higher yesterday, again on big volume and improving breadth.   The VIX (12.7) moved up fractionally, but remained below its 200 day moving average (now resistance), below its 100 day moving average (now resistance) and within a short term downtrend.  It stayed right on the upper boundary of that very short term downtrend.  A finish above that boundary would indicate the potential loss of downside momentum.   The lower boundaries of its intermediate term trading range (10.3) and long term trading range (9.8) are close by---both of which were set back in 2006.
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 {18192-20242}, [c] in an intermediate term uptrend {11627-24477} and [d] in a long term uptrend {5720-20271}.

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 {2123-2467}, [d] in an intermediate uptrend {2002-2604} and [e] in a long term uptrend {881-2419}. 

The long Treasury (118.47) rose slightly, but still ended 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.  However, it remained above the lower boundary of its short term trading range, avoiding for the moment a challenge of that level (117.3).


GLD (110.4) was up fractionally, but still closed below its 100 day moving average (now resistance), below its 200 day moving average (now resistance), below the lower boundary of its short term downtrend and back below a key Fibonacci level.  There is not much stopping it from going lower.

The dollar rose slightly, but remained below the upper boundary of its short term trading range (for the third time), keeping us all in suspense about whether it can successfully challenge that boundary.  Failure to do so would be a plus for US companies with global operations.

Bottom line: it sure looks like the Averages are zeroing in on another set of round numbers (20000/2300).  I have little doubt that those levels will be reached given seasonal factors along with institutional investors being underinvested and all investors being unwilling to sell until next year because of the anticipated changes in the tax code.  That said, time is running out on the indices continuing to advance while in extremely overbought territory.  That is not too say, there couldn’t be a sharp correction followed by another moonshot through year end.  Further, I think it likely that they will attempt a challenge of the upper boundaries of their long term uptrends---but that will prove unsuccessful.

Unlike stocks, TLT, GLD and UUP seem to have halted their earlier strong directional moves which raises the question are they or are stocks the leading indicator?


            Yesterday’s US economic data was good: month to date retail chain store sales and the November small business optimism index were upbeat but November import and export prices were down less than forecast.           

            ***overnight, Wells Fargo failed a key financial test for the second time.


(1)   November Chinese retail sales and industrial output came in above expectations while fixed asset investment was in line.  At the same time, a Chinese official acknowledged that its economic data contained made up stats,

(2)   Italy’s largest bank said in would lay off 14,000 workers and raise E13 billion                     in new capital.  In addition, Moody’s cut its outlook for Italian banks to negative (medium):

(3)   on the heels of the OPEC production cut agreement, China announced that it was ramping up oil production by most in three years (short):

                ***overnight, November Japanese business sentiment rose for the first time in 18 months; having suggested last week that it may begin tightening, the Bank of Japan stepped up its bond buying program; November UK employment fell.

            Bottom line: the Market has become the story; the latest chapter being everyone eagerly anticipating Dow 20000 and S&P 2300---which now seems inevitable.  No one appears to be paying much attention to events or the stats.  Although, it will be interesting to see how today’s statement and press conference following this week’s FOMC meeting are received.  That said, everything is awesome, so I see no reason why these wouldn’t be.
My thought for the day:  wishful thinking occurs when people are too optimistic; wanting to see things in a positive light.  It can distort perception and objective thinking.  Just because you really, really, really want your investment to appreciate, doesn’t mean it will. 

       Investing for Survival
            Diversification is no fun.

    News on Stocks in Our Portfolios
            General Mills (NYSE:GIS) declares $0.48/share quarterly dividend, in line with previous.


   This Week’s Data

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

            Weekly mortgage applications fell 4.0% while purchase applications were down 3.0%.

            November PPI was up 0.4% versus expectations of up 0.2%; ex food and energy, it was up 0.4% versus forecasts of up 0.2%.

            November retail sales rose 0.1% versus consensus of +0.4%; ex autos, they increased 0.2% versus projections of +0.4%.


            The history of a unified GOP government.  Something to think about (medium):

            New approach of corporate tax policy has house GOP support (medium):

            In eight months the ECB balance sheet will equal the Fed’s (short):



A review of Federalist 68 (the electoral college) (medium):

  International War Against Radical Islam

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