The indices (DJIA 22024, S&P 2468) had a volatile day but ended modestly to the upside. Volume fell; breadth improved. The upward momentum as defined by the Averages’ 100 and 200 day moving averages and uptrends across all timeframes remains intact. At the moment, technically speaking, I see little to inhibit their challenge of the upper boundaries of their long term uptrends---now circa 24198/2763.
The VIX (11.7) declined another 2 ¼ %, closing (1) below its 100 day moving average [now support]; if it remains there through the close on Friday, it will revert back of resistance but (2) above its 200 day moving average [now support]. If the VIX confirms its descent below the 100 day moving average and further pushes below its 200 day moving average, then clearly, the next resistance level is the former low. However, I leave open the questions as to whether the VIX made or is making some kind of bottom extending back to late July and if I was premature resetting of the intermediate term from trading range to downtrend.
The long Treasury rebounded, ending above its 100 and 200 day moving averages (both support), the lower boundaries of its short term trading range and its long term uptrend. That is a lot of support.
The dollar retreated, closing in a short term downtrend, below its 100 and 200 day moving averages and failed to make a new higher high. Let’s see what happens when it challenges its recent higher low.
GLD moved up, finishing above the lower boundary of its very short term uptrend and its 100 and 200 day moving averages (both support).
Bottom line: the indices fought through the hysteria over the Trump gaff and another confusing set of FOMC minutes---which is a pretty heavy load to overcome. So any thoughts of weakening upside momentum is probably a waste of time. That said, volume and the pin action in bonds, the dollar and gold continue to point to economic weakness.
There were only a couple of datapoints released yesterday: weekly mortgage and purchase applications as well as July housing starts were disappointing.
Overseas, second quarter EU GDP grew 0.6%, in line and the IMF raised its estimate for 2017 Chinese GDP growth.
In addition, rumors are that Draghi will not signal a policy change in his upcoming speech in Jackson Hole. ***which were confirmed overnight by the release of dovish ECB meeting minutes.
***overnight, July UK retail sales were stronger than anticipated.
The Fed released the minutes from its last FOMC meeting. As usual, there was the obligatory ‘on the one hand, on the other hand’ dialectic---a veritable smorgasbord of gems for both hawks and doves to hang on to. Indeed, reading and listening to the official media analysis of the minutes, there were both dovish and hawkish conclusions. However, the most important indicator for me is the futures market; and they were basically unchanged as to the likelihood of future Fed tightening. In short, nothing new. My bet is that the Fed will remain more dovish than generally expected---but that is one man’s guess.
How central banking increases income inequality (medium):
The level of negative yielding global debt surges……but, but everything is awesome. (short):
Of course, none of this mattered (not that the Fed minutes should have anyway) to the media which remained focused on Trump’s Wednesday clash with reporters as well as the disbanding of two presidential advisory councils. I have no idea how long this bull baiting goes on; but I suspect that as long as it does, it will hamper efforts to accomplish healthcare and tax reform and infrastructure spending.
Bottom line: yesterday’s poor data, the Fed’s indecision and the Draghi rumor of no forthcoming policy change seemed to keep investors hopeful that QEInfinity will last at least a little bit longer.
The positive stats out of the EU and Chinese economies apparently left investors unconcerned, which is understandable since so far any improvement in the global economy hasn’t shown up in our numbers.
Nor was anyone worried about the latest episode of the Trump reality TV series. After all, the worst thing that could happen, economically speaking, is nothing, i.e. gridlock. As you know my preferred legislative scenario has long been gridlock. God only knows how much better off this country would be if we had had it the last sixteen years. To be sure that lowers the odds of healthcare and tax reform and infrastructure spending. But in the absence of healthcare reform, my biggest worry has been our political class blowing the budget apart by nonrevenue neutral taxing and spending measures. So from an economic policy point of view, while this intensified political acrimony could result in less than hoped from fiscal policy revisions but it also means our ruling class won’t be able to do anything stupid.
The one potentially bothersome outcome would be further degeneration in the political dialogue that spawns more violence and further rents the social fabric of this country.
Earnings update (short):
My thought for the day: sometimes doing nothing is better than doing something. But nothing is the enemy of the financial community---it generates no fees or commissions but does generate taxes and trading frictions. Doing nothing is bad for business. Doing something because your broker says that you should is not a good reason. I only do something when my discipline, which establishes buy and sell prices well in advance, calls for it. That is why there are so few times you get a Subscriber Alert announcing any action on my part.
Investing for Survival
This is a bit long; but it deals with an important issue in investing---not losing money.
News on Stocks in Our Portfolios
This Week’s Data
Weekly mortgage applications rose 0.1% while purchase applications declined 2.0%.
Weekly jobless claims fell 12,000 versus consensus of down 4,000.
The August Philadelphia Fed manufacturing index came in at 18.9 versus expectations of 17.0
More on auto loans (medium):
Presented with no comment (short):
International War Against Radical Islam
Visit Investing for Survival’s website (http://investingforsurvival.com/home) to learn more about our Investment Strategy, Prices Disciplines and Subscriber Service.