Monday, June 5, 2017

Monday Morning Chartology

The Morning Call


The Market

            The S&P rallied again on Friday; but the Dow remained below its former high (21228)---though just barely.  Given that all news is good news, I can see little reason why the DJIA won’t catch up; and then we will off to the races, i.e. the upper boundaries of the Averages long term uptrends circa 24198/2753.

            The long Treasury spiked on Friday, likely the result of the poor nonfarm employment report.  As you can see, it traded through its 200 day moving average (if remains there through the close on Wednesday, it will revert to support) and began building a very short term uptrend.  It is also closing in on a challenge of its short term downtrend.

            GLD is behaving in concert with TLT---strengthening and showing little concern about rising interest rate.  It is closing in on the upper boundary of its short term trading range.

            The dollar is mirroring TLT and GLD. i.e. trading down, reflecting the increased likelihood of a weaker economy/lower interest rates.

            The VIX closed last week on all-time lows.  Aside from ending below its 100 and 200 day moving averages (now resistance) and in a short term downtrend, it also finished below the lower boundary of its intermediate term trading range for the second day (if it remains there through the close tomorrow, it will reset to a downtrend) and below the lower boundary of its long term trading range (if it remains there through the close on Friday, it will reset to a downtrend.



            More on valuation (medium):

       Investing for Survival
            Reframing the concept of risk.
       Investment/general biases
Theory induced blindness: we are unwilling to admit when we’re wrong, but rather try to craft the “best story possible” to make sense of what had occurred by altering “our image of what we thought earlier”. Rather than admitting a mistake, we believe we anticipated it in hindsight when we actually hadn’t. Example: if two football teams are evenly balanced going into a game and one “crushes” the other, you now perceive one as much stronger. Further, “that perception gives you the sense that this must have been visible in advance, that one of them was much stronger than the other”.  Hindsight “allows us to keep a coherent view of the world, it blinds us to surprises” and “prevents us from learning the right thing”. Even when we do admit a mistake, we say we won’t do it again when we should really learn from surprises that “the world is difficult to anticipate”.
    News on Stocks in Our Portfolios

   This Week’s Data

            Revised first quarter nonfarm productivity was flat versus expectations of -0.2%; unit labor costs rose 2.2% versus estimates of up 2.6%.


            The Fed and China (medium):

            ***overnight, the May EU Markit composite PMI was unchanged from April; the Chinese services PMI was better than expected while the UK services PMI was worse; the World Bank forecast 2017 global growth of 2.7% and for 2018 2.9%



  International War Against Radical Islam

            Is Afghanistan a lost cause?  Did someone whisper Vietnam? (medium):

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