The indices (DJIA 21359, S&P 2432) were off big intraday but recovered to turn in only small losses by the close. Nevertheless, both are in solid uptrends as defined by their 100 and 200 day moving averages and uptrends across all timeframes. At the moment, I see nothing, technically speaking to inhibit the Averages’ challenge of the upper boundaries of their long term uptrends---now circa 24198/2753. Volume rose and breadth weakened but is still positive.
The VIX (10.9) was up 2 1/2 %. Intraday, it traded through its 200 day moving average but finished below it as well as its 100 day moving average and above the lower boundaries of its intermediate and long term trading ranges.
The long Treasury was off slightly, finishing above its 200 day moving average for the second day (if it remains there through the close on Monday [I mistakenly said Tuesday in yesterday’s Morning Call], it will revert to support) and right on the upper boundary of its short term downtrend (if it remains there through the close on Monday, it will reset to a trading range; if it successfully challenges that boundary, it will also break out of the developing pennant formation---a positive, technically speaking).
The dollar rebounded 0.5%, providing the first sign of life since mid-May. Nonetheless, it ended in a very short term downtrend, below its 100 and 200 day moving averages and its chart still has an unhealthy look.
GLD fell, ending below the upper boundary of its short term trading range but above its 100 and 200 day moving averages with the 100 day moving average now above its 200 day moving average (usually a positive technical signal).
Bottom line: stocks have had a lot to digest this week: a slew of economic data, an unexpectedly less dovish Fed and an unfolding soap opera in Washington that rivals anything on afternoon TV and have done a decent job in maintaining their cool. Of course, as I constantly point out, as long as all news is good news, then this all is to be expected.
TLT and UUP did some consolidation work but both charts seem to be suggesting that their investors are less optimistic about the economic outlook as implied by stocks (and the Fed). I remain unsure how to interpret all of this as it relates to fundamentals.
Yesterday’s economic data had a more upbeat tone than earlier in the week: weekly jobless claims dropped more than anticipated, the June Philly and NY Fed’s manufacturing indices were better than expected and May import and export prices declined (that could be interpreted either way depending on your perspective. If you like lower prices, it is good; if you are worried about recession, not so much). On the other hand, May industrial production and the June housing index were below estimates---the former assures that the primary indicators this week will be negative.
***overnight, the Bank of Japan met, left rates unchanged and reiterated that its devotion to QEInfinity.
Bottom line: the economic dataflow is not improving, the Fed continues to tighten in spite of that and our entire political class seems to have a death wish which is not major plus for the enactment of the Trump/GOP fiscal plan. This may all end in story book fashion but it seems prudent to me to hedge that outcome by selling a portion of big winners and all of the losers in a portfolio---recognizing that on a short term basis you are going to look stupid.
My thought for the day: it is important to develop a very strict Buy/Sell discipline which provides an investor with an element of self-confidence that will sustain and guide him/her us in an uncertain environment.
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This Week’s Data
May industrial production was flat with April versus an expected 0.2% increase.
The June housing market index came in at 67 versus estimates of 70.
May housing starts fell 5.5% versus forecasts of up 4.3%; permits declined 4.8% versus projections of up 1.6%.
An alternative look at national well-being (short):
EU and Greece reach a deal on the next bailout tranche (medium):
The latest from my favorite optimist (medium):
Chinese lie again (medium):
Germany, Austria slam US sanctions against Russia (medium):
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