Tuesday, March 7, 2017

The Morning Call--When the rubber meets the road

The Morning Call

The Market

The indices (DJIA 20954, S&P 2375) continued to consolidate after Wednesday’s strong performance.  Volume fell, but remained at a high level; breadth was mixed, but remained overbought.   The VIX (11.2) was up 2 ½ %, but still ended below its 100 and 200 day moving averages (now resistance) and in a short term downtrend but is near the lower boundary of its intermediate term trading range (10.3)---leaving complacency at a near record high level.
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 {18893-21194}, [c] in an intermediate term uptrend {11815-24667} 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 {2211-2545}, [d] in an intermediate uptrend {2059-2663} and [e] in a long term uptrend {881-2561}.

The long Treasury was down, falling below the lower boundary of that developing pennant for a second time; if it remains there through the close today, that formation will be negated.  It is below its 100 and 200 day moving averages and in a very short term downtrend.

GLD fell but still closed above its 100 day moving average (now support).  Nevertheless, it ended below its 200 day moving average (now resistance) and within a short term downtrend. 

The dollar was up, ending above its 100 day moving average (now support), its 200 day moving averages (now support), in a short term uptrend and seems to have set a new very short term uptrend.  

Bottom line: the Averages’ pin action is surprisingly upbeat given the extent of their overbought condition.  Nothing to fear here.  The assumption has to be that they are headed for the upper boundaries of their long term uptrends.  Bonds, the dollar and gold are all pointing at an improving economy and a tightening Fed.



            One US datapoint was released yesterday: January factory orders were slightly above estimates, though they were down versus the December reading.  Overseas, the January investor sentiment came in at a decade high; fourth quarter Greek GDP fell 1.2%.
            ***overnight, fourth quarter EU GDP growth was slightly below estimates; January German industrial orders plunged 7.4%.

            Forgetting for the moment that most of our political class and all of the media are running around with their hair on fire, this week will be a slow one as far as the numbers go.  Any attention that gets paid to economics and valuations will likely be centered on:

(1)    the upcoming ECB (this week) and Fed (next week) meetings.  Both have signaled their intent; so there shouldn’t be any surprises,

(2)   the just released GOP ‘repeal and replace’ version of Obamacare.  We don’t know many of the particulars just yet.  But that shouldn’t take long.


Bottom line: markets have been happy with the generalized prospects of at least some improvement in fiscal policy under Trump, a Fed that is very Market friendly and an economy that is growing however erratic that might be.  With the introduction of Obamacare reform, the rubber is now the meeting road on item number one.  Let’s see how investors react when the sausage making is in the headlines daily.

The third time is a charm (medium):

            My thought for the day: as investors, we are constantly bombarded with ads touting a ‘new’ system in trading that lead its developer to untold wealth.  Let’s be kind and assume that this ‘new’ system works for the guy that developed it and he made all the money he was purported to have made.  Any trading system is simply a process of digesting data and applying it in a way that gives the trader an advantage.  So again, assume it works.  How long do you think it will work after 100,000 or 200,000 traders start processing the same set of data applying the ‘new’ system?  Hint: a nanosecond.  Let me tell you, if I came up with a system that consistently outperformed other strategies by a wide margin, I wouldn’t tell a soul.
       Investing for Survival
            Most seniors are making a big retirement mistake.

    News on Stocks in Our Portfolios
Brown-Forman (NYSE:BF.B): FQ3 EPS of $0.47 misses by $0.01.
Revenue of $808M (-0.1% Y/Y) beats by $5.41M.

The quarterly payout for Qualcomm was lifted 7.5% to $0.57 per share from $0.53. The annualized yield is now 4%.


   This Week’s Data

            January factory orders rose 1.2% versus expectations of up 1.1%.

            The January US trade deficit was $48.5 billion, in line.

            Growth in month to date retail chain store sales slowed last week.


            For the optimists (medium):

            The case against the border adjustment tax (medium):

            The implications of the ECB’s QE on countries who may want to exit (medium):



  International War Against Radical Islam

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