Tuesday, May 16, 2017

The Morning Call--Does the Trump fiscal agenda have a snowball's chance?

The Morning Call


The Market

The indices (DJIA 20981, S&P 2402) had a good day.  The S&P closed right on its all-time high while the Dow finished below its comparable level (21228).  Volume rose; but breadth was mixed.  Indeed, I thought that breadth would have been stronger on a day that the S&P closed on its former high.  Nonetheless, both remain above their 100 and 200 day moving averages and the lower boundaries of uptrends across all major time frames. 

Certainly, yesterday’s pin action supports my assumption that the Averages will probably successfully challenge their all-time highs (21228/2402);  (1) don’t forget those unfilled gaps below and (2) if the challenge is successful, the upper boundaries of their long term uptrends [22623/2591] become the next objective.

The VIX (10.4) was up fractionally, leaving it above the lower boundaries of its intermediate and long term trading ranges.  While it remains below its 100 and 200 day moving averages, it still has a gap overhead that would require it to trade at 12.2 to be filled.

There was no clear pattern of trading in the long Treasury (lower: suggesting higher rates), the dollar (down) and gold (up)---both suggesting lower rates.

Bottom line:  the indices rallied yesterday and managed to hold on to most of the gain.  This is clearly the start of an S&P challenge of its all-time high; though the Dow still has a ways to go.  Before we can start anticipating a challenge of the upper boundaries of their long term uptrends, the Dow has to confirm any break by the S&P.


            The US economic data yesterday was mixed: the May NY Fed manufacturing index was a huge miss on the downside while the May housing market index came in ahead of expectations.  Nothing from overseas.  Nothing from the Fed.  Only the daily distractions from accomplishing repeal and replace and tax reform.

            ***overnight, April UK CPI and PPI were higher than projected.

            Bottom line: I am not really sure what got investors jiggy yesterday and could keep them that way to sustain a successful challenge of the indices all-time highs.  Higher oil prices?  The only thing higher oil prices will do is bring out more US shale production which will keep a lid on prices.  Economic data? The NY Fed number was awful.  Yes, good news is good news and bad news is good news and really sh*tty news is Christmas in July.  But that assumes that the Fed will respond to poor data by becoming more dovish.  In point of fact, the Fed has consistently ignored the deteriorating data for the last three months while pushing its agenda of raising rates.  Maybe that all will change; but why start now?  Improved odds of tax reform?  Give me a break.  What barriers the dems and the media aren’t throwing up to the Trump/GOP fiscal program, Trump is doing himself. 

            Stocks are overvalued. The economy continues to slip back toward zero growth.  And somebody needs to take the gun out of the Donald’s hand before he shoots off both feet.

            My thought for the day: flexibility is the cornerstone of long term investing success and investors that are unwilling to adapt and change are doomed to extinction – much like the dinosaur.  Having a methodology that acts as an operating system where all types of applications can be used will separate you from the weak players and allow you to capitalize on their mistakes.

       Investing for Survival
            Information avoidance.

    News on Stocks in Our Portfolios
Home Depot (NYSE:HD): Q1 EPS of $1.67 beats by $0.06.
Revenue of $23.9B (+5.0% Y/Y) beats by $180M.


   This Week’s Data

            The May housing market index was reported at 70 versus estimates of 68.

                April housing starts fell 2.5% versus expectations of a 3.3% increase.


            The unavoidable pension crisis (medium and a must read):



  International War Against Radical Islam

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