Wednesday, March 15, 2017

The Morning Call--A big day

The Morning Call


The Market

The indices (DJIA 20837, S&P 2365) drifted lower yesterday. Volume declined but remained at a high level; breadth was weak.   The VIX (12.3) popped 8 ¼ %, ending close to, but still below, its 100 day moving average (now resistance).  In addition, it was below its 200 day moving average (now resistance), in a short term downtrend but in a very short term uptrend---remaining in a rebound off the lower boundary of its intermediate term trading range.   That could be a sign that the high level of complacency is over; but the VIX needs to start breaking resistance levels before we can have any conviction that is the case.
The Dow closed [a] above its 100 day moving average, now support, [b] above its 200 day moving average, now support, [c] in a short term uptrend {19028-21283}, [c] in an intermediate term uptrend {11837-24689} and [d] in a long term uptrend {5751-23298}.

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 {2223-2557}, [d] in an intermediate uptrend {2065-2669} and [e] in a long term uptrend {881-2561}.

The long Treasury was up 0.5%, bouncing off of the lower boundary of its short (I incorrectly said intermediate in yesterday’s recount) term trading range.  It is also below its 100 and 200 day moving averages and in a very short term downtrend.  Despite TLT’s upbeat performance yesterday, the rest of the fixed income complex was down.  

GLD rose 0.5%, closing below its 100 day moving average (now resistance), its 200 day moving average (now resistance) and within a short term downtrend. 

The dollar was up, ending back above the lower boundary of the recently (Monday) reset very short term uptrend.  That raises the issue as to whether the break of that boundary was real or a false flag.  While follow through always provides the answer, the fact that it is above its 100 day moving average (now support), its 200 day moving average (now support) and in a short term uptrend, suggests the latter.

Bottom line: to all appearances, the Averages are handling the consolidation from an overbought condition very well. So the assumption continues to be that they are headed for the upper boundaries of their long term uptrends.  However, the pin action in the commodities, oil, gold and bonds continues to raise questions about the validity of that assumption.
            The latest from Doug Kass (medium):

            Warning from a chartist (medium):



            Yesterday’ economic stats were marginally positive: month to date retail chain store grew faster than in the prior week, the February small business optimism index was up fractionally and the headline February PPI as well as the ex food and energy numbers were higher than forecast.

            Overseas, the British parliament approved Brexit talks; February Chinese retail sales fell short of estimates while industrial production was above expectations.

            In other news:

(1)   oil continued to fall.  Don’t forget both the economic and Market action following the last ‘unmitigated’ positive oil price decline (medium):

(2)   the Donald issued an executive order for the comprehensive reorganization of the executive branch; kudos for the D.  So far his executive orders have been the sole economic positive; the rest is ‘on the come’. (medium):

(3)   the             March FOMC meeting began, will wrap up today and a 25 basis point in the Fed Funds rate is expected.

(4)   finally, the Dutch go to the polls today opening the possibility of electing another anti-EU party.   

Bottom line:  if history is any guide, it seems reasonable to assume that a continuation of the decline in oil prices may not be a Market friendly development.  In addition, with the debate on Trumpcare now live and commanding lots of media space, the period in which investors were free to feel all warm and fuzzy about the Trump fiscal agenda may be coming to an end.   Either or both may hamper further progress to newer highs. 

On the other hand, over the last two years, I have continually underestimated the Markets willingness to see a silver lining that was not that obvious to me.  So I have to go with my technical bottom line.  Meaning that until the Market yells ‘uncle’, I have to assume that it will continue to ignore potential bad news and push stock prices higher.  That said, if I held any stock that had been a big winner, I would sell a portion of that holding; and I would eliminate all my losers.

The latest from David Stockman (medium):

            Shiller worried about equity valuations (medium):
            My thought for the day: the analyst who talks about his mistakes is the guy you want to listen to. Avoid the guy who doesn't -- his are much bigger.

       Investing for Survival
            Myths of investing #7

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

Microsoft (NASDAQ:MSFT) declares $0.38/share quarterly dividend, in line with previous.


   This Week’s Data

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

            Weekly mortgage applications were up 3.1% while purchase applications rose 2.0%.

            February CPI was up 0.1%, in line, ex food and energy, it was also in line.

            February retail sales rose 0.1%, in line; ex autos, it was up 0.2% versus estimates of up 0.3%.

            The March NY Fed manufacturing index came in at 16.4 versus forecasts of 15.4.


            A couple of questions Trump should be asking economists (medium):

            More on the growing pension funding problem (medium):



  International War Against Radical Islam

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