Friday, February 3, 2017

The Morning Call--Delivering more angst than economic policy

The Morning Call


The Market

The indices (DJIA 19884, S&P 2279) had a mixed day (Dow down, S&P up slightly).  Volume fell but remained at elevated levels; breadth was negative.   The VIX (11.9) was up fractionally, closing below its 100 and 200 day moving averages (now resistance) and in a short term downtrend.

The Dow ended [a] above its 100 day moving average, now support, [b] above its 200 day moving average, now support, [c] in a short term uptrend {18655-20695}, [c] in an intermediate term uptrend {11740-24592} and [d] in a long term uptrend {5730-20736}.

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 {2179-2522}, [d] in an intermediate uptrend {2038-2639} and [e] in a long term uptrend {881-2500}.

The long Treasury declined slightly, remaining in a very short term downtrend, near the lower boundary of its short term trading range and below the 100 day moving average (now resistance), falling further below its 200 day moving average (now resistance).  

GLD rebounded, ending close to reestablishing a very short term uptrend and challenging its 100 day moving average (now resistance).  It remained below its 200 day moving average (now resistance) and within a short term downtrend. 

The dollar rose, bouncing off its 100 day moving average (now support) and above 200 day moving averages (now support) and in a short term uptrend.   However, it continues to develop a very short term downtrend.

Bottom line: yesterday was another quiet day with the Averages remaining within their trading ranges dating back to mid-December but below the 20000/2300 levels.  I am waiting for a move below the aforementioned trading range or above 20000/2300 as an indication of Market direction.  Until then, patience.
            However, TLT, UUP and GLD appear to be about to challenge the first resistance/support levels that could lead to directional changes.  My interest is in GLD which I think would be a trade if it reestablishes a very short term uptrend and successfully challenges its 100 moving average.



            Yesterday’s economic data improved: weekly jobless claims fell more than anticipated, fourth quarter productivity was better than expected while January retail chain store sales were below estimates.  Nothing from overseas.

            Thursday with Trump:  following the ‘Iran is on notice’ pronouncement, he wasted no time in announcing new sanctions

            Friday with Trump: a busy day for the Donald including an executive order reversing some parts of Dodd Frank (short)

            More on the Dodd Frank rollback.  While I have been applauding almost all of the Trump deregulation moves, at first blush, this looks like it is not in the best interest of the retail consumer. 

The latest from Nouriel Roubini (medium):

Bottom line:  the economic dataflow is not particularly good; and to date, the Donald hasn’t done much to improve it.   To be sure, he is delivering on his campaign promises with a vengeance; but in the process, he has been stepping on the toes of not only the US but the international establishment.   That is not a bad thing in and of itself.  God only knows that the global ruling class has done a lot more to improve their own lives than they have ours. 

But so far, Trump has delivered more angst than better economic policy.  Indeed as I have repeated pointed out, the most important economic issue that he has focused on is trade; and what he says that he intends to do in that regard would likely be detrimental to the economy.  Plus, not only has there been a dearth of discussion on his major economic pledges (taxes and infrastructure spending) but there is reason to believe that they may be nonstarters. 

The point here is that there is a risk the Market may tire of aggressive dialogue in the absence of meaningful steps to improve the economy.

Small wonder that investors may be developing heartburn---and at valuation levels that leave little room for error. I would continue to sell a portion of my successful positions and get rid of my losers.’

                More on valuation (medium):

            My thought for the day: No successful football teams steps on the field without a game plan; no successful company opens its doors without a business plan; and no investor can be successful without a strategy which includes price parameters for purchase and risk parameters for an exit.  That is why I created our Valuation Model which keeps the investor from paying too much for a stock and forces him/her to sell either after a price objective has been met or to avoid a major loss.

       Investing for Survival
            Myths in investing #3

    News on Stocks in Our Portfolios
            PepsiCo (NYSE:PEP) declares $0.7525/share quarterly dividend, in line with previous.


   This Week’s Data

            January retail chain store sales growth were below expectations.

            January nonfarm payrolls rose 70,000 versus estimates of 19,000.


            Dividends indicate diminishing distress on US economy (short):

            Update on student loans (medium):

            Quote of the day (short):

            China suffers record capital outflow in 2016 (short):




            British government publishes Brexit white paper (medium):

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