Monday, June 26, 2017

Monday Morning Chartology

The Morning Call


The Market

            There is not a lot of technically astute observations one can make about this chart except that the S&P is going up and there are no resistance points between current prices and the upper boundary of its long term uptrend (2763).

            The long Treasury (128) continues to act well.  With its successful challenge of its short term downtrend, the next visible resistance is the upper boundary of its newly reset short term trading range (139).  This positive pin action appears to reflect bond investors’ doubts about the strength in the economy.  Although there is disagreement on that point.

                An interesting thesis on what is driving bond prices up (medium):

            And (medium):

            Now reverse everything I said about TLT.  UUP continues to act lousy.  Having successfully challenged the lower boundary of its short term uptrend, its next level of support is the lower boundary of its newly reset short term trading range.  The only thing that is similar is that it also seems to be pointing to a weaker economy/lower interest rates.

            The good news for GLD is that it bounced up off its 100/200 day moving averages; plus it has made a third higher low.  The bad news is that it has made two unsuccessful challenges of the upper boundary of its short term trading range.  So while the GLD’s chart improved last week, I am now watching which resistance/support level is overcome first.

            The VIX (10.02) was off 4% on Friday despite it being a basically flat day; if it remains there through the close next Wednesday, the intermediate term trend will reset to a downtrend.   That said, it closed below the lower boundary of its intermediate term trading range for the sixth time since mid-April, having been unable to successfully challenge that boundary on any of those occasions.  Given that the all-time historical low close was 9 3/8, it seems likely that challenge will be no more successful than the prior six times.




The economic data last week was quite positive and included three primary indicators (new home sales, existing home sales and leading economic indicators), two of which were positive and one neutral.  That brings the score to: in the last 90 weeks, twenty-nine were positive, forty-nine negative and twelve neutral.  While I will take good news over bad any day, (1) there were not a lot of stats last week and (2) at this point, it appears that the numbers were more of an outlier than the mark of a change in trend.  So I won’t be altering our short term outlook.

Another factor for the short term that I am watching is oil.  It has been declining in price based on the economics of supply and demand; and given the negative impact on economic activity the last time prices fell markedly, I have no reason to assume that this time will be any different.  That suggests yet another headwind for the economy.  On the other hand, if the mounting political tensions within the Middle East OPEC members (Gulf States vs. Qatar; Sunni vs. Shi’a) suddenly become manifest in open conflict, it would likely reverse this downtrend in a nanosecond.  Unfortunately, this scenario is likely less economy/Market friendly than declining oil prices.

Longer term, there were a couple of positive developments last week: 

(1)   the US banks passed the first stage of the most recent Fed stress test with flying colors.  In my mind the real benefit of this is that the US economy is less apt to go into cardiac arrest once the economy/Market hits a speed bump as in 2008/2009.  That said, if the banksters can persuade their bought and paid for political lapdogs to loosen Dodd Frank too much, it could provide short term economic benefits but would undo, at least, some of the gains in banks’ financial strength accomplished through those regulations.

(2)   the senate presented its version of a new healthcare bill.  Given the tone of the news reporting, you may be wondering why I list this as a positive.  And the answer is because we went through this exact same process after house announced it version of a new healthcare bill---DOA, split GOP, will kill millions and cost money, yada, yada, yada [I mentioned the bisque].  To be sure, any or all of those things could shut the process down; not to mention the dems relentless effort to investigate every corner of Trump’s life in the hopes of delaying/preventing the passage of the Trump/GOP fiscal program [not that he hasn’t brought a lot of this on himself].  So I am not getting jiggy here.  I am saying that any step forward, however small in the implementation of that program is a plus.  But, at this stage, it clearly does not warrant a review/upgrading of our long term secular economic growth rate assumption.

David Stockman has another thought on the fallout from Washington dysfunction (medium):

             Bottom line: nothing has changed in our short term or (recently improved) long term economic forecasts.  The risks of a weak global banking system, an inefficient, economically debilitating fiscal policy, a completely f**ked up monetary policy, potential international confrontations, war, pestilence, famine and death (just kidding) remain with us as does a grossly overvalued equity market.  You don’t need to run for the hills; but own some cash.
            Goldman just now figures out the misguided Fed policy creates recessions (medium):

            Fundamentals no longer matter? (medium):

       Investing for Survival
            Patience exemplified.
    News on Stocks in Our Portfolios

   This Week’s Data

            May durable goods orders fell 1.1% versus expectations of down 0.4%; ex transportation, they rose 0.1% versus forecasts of +0.5%.

            The May Chicago Fed national activity index came in at -.26 versus estimates of +.32.


            Italy bails out two failed banks (long):


This article has clear political overtones.  While I try to avoid this in my commentary, I include it because of the potential effect an adverse conclusion could have on the economy and the Market (medium):

            Update on senate healthcare bill (medium):

  International War Against Radical Islam

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