Thursday, May 4, 2017

The Morning Call--The bizarro Fed

The Morning Call


The Market

            My charting service will no longer be supported by Java and has been transfer to another platform.  As a result, I have lost everything.  It is going to take some time for me to reconstruct my database, so bear with me.

The indices (DJIA 20957, S&P 2388) were mixed (Dow up, S&P down) yesterday.  Volume fell; I have not yet gotten the breadth indicators working.   Both remain above their 100 and 200 day moving averages and the lower boundaries of uptrends across all major time frames---all of which acts as support.  That clearly means that momentum remains to the upside.  So it is resistance that becomes important.  Immediate resistance now exists at their former highs (21228/2402) and ultimately at the upper boundaries of their long term uptrends (23390/2591). 

The VIX (10.7) was up fractionally, but remains below its 100 and 200 day moving averages.  However, it held above the lower boundaries of its short and intermediate term trading ranges---perhaps indicating that it has found support. 
The long Treasury and the dollar moved fractionally, providing no informational value.  Gold was smacked hard, likely reflecting the more hawkish tone of yesterday’s FOMC statement (see below).

Bottom line: investors seem stuck on the sidelines.  We have received some valuable input this week with the apparent resolution of the debt ceiling bill and the FOMC meeting.  Neither had much impact (except on GLD).  Perhaps they are waiting on the April jobs report on Friday or the French elections this weekend.  Or maybe they are so confused by the poor data and upbeat Fed, they don’t know whether to s**t or go blind. 

Short term aside, the assumption remains that prices head higher, but remembering that there are two big gaps to fill lower down.

            Update on insider selling (medium):



            The economic data improved: the April ADP private payroll report, the April Markit services PMI and the April ISM nonmanufacturing index came in better than anticipated; weekly mortgage applications fell though purchase applications rose.  Remember that the service economy is much bigger than the manufacturing side.

            ***overnight, April UK Markit services PMI hit a four month high.

            In addition, it appears that GOP now has enough votes to pass repeal and replace in the house.  Of course, senate approval is also needed.  And the CBO has not scored the latest revision.  But credit where credit is due---they haven’t stopped trying.

            The big news of the day was the conclusion of the latest FOMC meeting.  It left rates unchanged; no surprise.  However, the statement issued following the meeting read like the bizarro world script from Seinfeld: the poor economic stats, they were ‘transitory’; the lousy inflation numbers, not reflective of the Fed’s chosen indicator; reducing the Fed’s balance sheet (the 900 pound gorilla), radio silence.  In short, the Fed believes (says it believes) that everything remains awesome, so more rate hikes are on the way---a bit more hawkish in tone than most expected.

            The bottom line: the risk here is that the Fed continues to tighten just as the economy rolls over in what would be a normal correction after eight years of expansion, albeit subpar.  As you know, I am not particularly concerned that about the economic consequences of the unwinding of a disastrous monetary experiment.  But such a move would likely (1) destroy the blind faith in the Fed by at least a portion of yet another new generation of investors and (2) reaffirm the stupidity of trusting the Fed to all the subsequent generations of investors that have already been f**ked enumerable times---my thesis that triggers the unwind of the massive mispricing and misallocation of assets.

            More on the sh*tty job these guys have done (medium):

       Investing for Survival
            Wisdom from Newton and Druckenmiller.


    News on Stocks in Our Portfolios

   This Week’s Data

            The April Markit services PMI was reported at 53.1 versus expectations of 52.3.

            The ISM nonmanufacturing index came in at 57.5 versus estimates of 55.8

            The March trade deficit was $43.7 billion versus forecasts of $44.5 billion.

            Weekly jobless claims were down 19,000 versus consensus of down 11,000.

            First quarter nonfarm productivity fell 0.6% versus projection of being flat; unit labor costs rose 3.0% versus the prior reading of 1.7%


            Puerto Rico files for bankruptcy (medium):

            More problems in China (medium):

            And Kyle Bass comments on them (short):



            Joke of the day: North Korea threatens China (medium):

Visit Investing for Survival’s website ( to learn more about our Investment Strategy, Prices Disciplines and Subscriber Service.

No comments:

Post a Comment