Thursday, May 11, 2017

The Morning Call--Apparently no one cares

The Morning Call


The Market

The indices (DJIA 20943, S&P 2399) were mixed (Dow down, S&P up) and generally quiet again yesterday.   Volume was flat; breadth was weaker.   Both remain above their 100 and 200 day moving averages and the lower boundaries of uptrends across all major time frames. 

They are both still hovering near their former highs (21228/2402).   My assumption is that they will probably successfully challenge those highs; though the longer they hang around current levels and the more unsuccessful challenges they make on their former highs, the greater the odds that the next move is down. However, I am not suggesting a Market top.  We will only know that when those support levels start to get violated.

Attention remains on the VIX (10.1) which was up 2 ¼ %.  However, it remained below the lower boundary of its intermediate term trading range for the third day (if it remains there through the close today [I originally mistakenly said Friday], it will reset to a downtrend.)
The long Treasury was down, GLD was unchanged and the dollar was up.  Again their pin action pointed to higher interest rates---probably a function of hawkish comments this week from multiple Fed heads.

Bottom line: investors seemingly remain tranquilized accepting good news as good news and everything else as either good news or no news.   As I suggested above, the question right now is, are the indices resting in preparation for an assault on their former highs or have they shot their wad?  Based on the aforementioned eerie calm, I think the answer is likely the former; but we won’t know until it happens.



            Yesterday’s economic news was mixed: weekly mortgage and purchase applications were up while April import and export prices were up much more than forecast.  Whether one classifies the latter as good or bad news depends on one’s perspective.  I assume the Fed will view it as good news.
Overseas, the Chinese dataflow remains negative (April CPI and PPI slowed) while EU stats strengthen (March French and Italian industrial production were stronger than anticipated).  In addition, it now appears certain that Greece will receive the next round of bailout funds.

            ***overnight, the Bank of England left rates and its bond purchase program unchanged but hinted that rates could be rising soon (medium):

            In addition, April Chinese vehicle sales fell 2.2%; the EU raised its 2017 GDP growth forecast for the union.

            Chinese commodities continue to plunge (short):

            Bottom line: of course, politicians and the media filled the headlines and airwaves with commentary on the Comey firing.  Rhetoric aside, the only thing that matters, economically speaking, is the impact this controversy has on the Trump fiscal reforms.  I think it too soon to know.  But if you believe the nonchalant response of the Market, this is much ado about nothing.

            More thoughts on the Fed (medium):

            Goldman on Fed policy (medium and a must read):

            More on valuations (short):

            Stats for the bulls (short):

            My thought for the day:  Diversification is fundamentally a risk-reduction strategy built around the idea of spreading your portfolio across several different investments. To be clear, it is a strategy to help manage investment risk, not eliminate risk-no portfolio, no matter how well diversified, can eliminate entirely the risk of loss of principal.  Rather, diversification holds out the possibility of producing a portfolio with the same expected return but less risk than a less - diversified alternative. Or, increasing portfolio diversification may allow an investor to improve returns for a given level of risk.

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            Playing to win.


    News on Stocks in Our Portfolios

   This Week’s Data

            Weekly jobless claims fell 2,000 versus expectations of a 6,000 rise.

            April PPI was up 0.5% versus estimates of up 0.2%; ex food and energy, it was up 0.4% versus forecasts of up 0.2%.


            The latest (acknowledgment of failure) from OPEC (medium):

            Moody’s slashes rating on Canadian banks (medium):



  International War Against Radical Islam

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