The indices (DJIA 21467, S&P 24373) fell back yesterday, but not enough to close Monday’s gap open. So we could see more weakness short term. Nevertheless, they retain their upward momentum 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 24198/2763. Volume rose slightly but breadth weakened.
The VIX (10.9) was up 4 ¾ %, but remained between the lower boundaries of its intermediate and long term trading ranges on the downside and its 100 and 200 day moving averages on the upside.
The long Treasury spiked 1%, finished above its 100 and 200 day moving averages (now support) and in a short term trading range---continuing to reflect bond investors’ doubts about a strong economy/rising inflation.
The dollar was up but still ended in a very short term downtrend and below its 100 and 200 day moving averages.
GLD was down again, closing below the upper boundary of its short term trading range and its 100 day moving average (if it remains there through the close today, it will revert to resistance) and right on its 200 day moving average. This chart keeps getting uglier.
Bottom line: a short term retreat is not unexpected, given the need to fill Monday’s gap open. However, there seems little reason to be concerned about the long term, technically speaking, except for the troublesome decline in Treasury rates and the flattening yield curve.
Yesterday in charts (short):
Two minor datapoints yesterday: the first quarter US trade deficit was less than forecast and the growth of month to date retail chain store sales rose from the prior week.
Overseas, the news was not quite so positive: BOE chief said that now it is not the time to raise rates; Chinese yield curve inverts.
***overnight, the BOE is taking a page from the Fed’s playbook (on the one hand, on the other hand) as its chief economists says that it is time to raise rates.
And China attempts to un-invert its bond yield curve,
The only other mentionable item is the continuing fall in oil prices. Given history, I can’t believe that people bought into the OPEC production cut/higher oil prices thesis in the first place; and perhaps that thesis will prevail. But at the moment, it is suffering some severe heartburn. Plus, it still belies the notion of lower oil prices = unmitigated positive.
Bottom line: aside from the news of Amazon buying Whole Foods and its new ‘try before you buy’ concept which have the Market all atwitter, the economic and political news flow is not what I would call upbeat---particularly the geopolitical goings on in the Middle East and North Korea. I have said this before; but at some point, bad news will be bad news. Clearly, I have no idea when.
My thought for the day: I know lots of investors who spend hours doing their homework; then instead of following their work, they chase ideas/tips from friends or brokers. I probably don’t have to tell you which investments were the bigger winners.
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This Week’s Data
Month to date retail chain store sales grew faster than in the prior week.
Weekly mortgage applications rose 0.6% while purchase applications fell 1.0%.
One calculation of the odds of a recession (short):
Another sanguine look at the economy (medium):
Citi on Fed policy (medium):
More on the pension underfunding problem (short):
And speaking of underfunding, Illinois is at the edge of crisis (medium):
International War Against Radical Islam
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