Tuesday, June 20, 2017

The Morning Call---More trouble in the Middle East

The Morning Call


The Market

The indices (DJIA 21528, S&P 2453) had a great day.  They actually gapped up.  The last time this happened, the gap got closed within a week but there was no follow through to the downside.  They clearly 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 fell but breadth was quite strong.

The VIX (10.3) declined fractionally---a bit unusual for big up price move.  It would seem that the lower boundaries of its intermediate and long term trading ranges are providing decent support.  On the other hand, it remains below its 100 and 200 day moving averages.
The long Treasury fell slightly but still finished above its 200 day moving average for the fourth day, reverting to support and the upper boundary of its short term downtrend for the third day, resetting to a trading range.  In doing so, it also breaks out of the developing pennant formation---a positive, technically speaking.  I think that the initial objective is circa $139.

The dollar was up but still ended in a very short term downtrend and below its 100 and 200 day moving averages. 

GLD was off .75%, closing below the upper boundary of its short term trading range and its 100 day moving average (if it remains there through the close on Wednesday, it will revert to resistance).  However, it is still above its 200 day moving average---but just barely.  This chart keeps getting uglier. 

Bottom line: the euphoria in equities continues impervious to the news flow, valuations and cognitive dissonance coming from the pin action in the bond and dollar markets.  Enjoy it while it lasts; just be sure to take some money off the table, peeling back a portion of your biggest winners.

            Oil plunges back to its November low (medium):



            There were no data releases yesterday, either here or abroad. 

            ***overnight, BOE chief said that now it is not the time to raise rates; Chinese yield curve inverts.

            We did get some hawkish comments from NY Fed head Dudley---to no lasting effect.  However, he is just the first of many this week. (medium):

                Though Mohamed El Erian thinks maybe the Market should be paying closer attention (medium):

                Plus there were lots going on in the Middle East---none of it good.

            Saudi’s foil an Iranian attack of offshore production facilities (medium):

            US and Russia now eyeball to eyeball.

            Israel funding Syrian rebels (medium):

                Bottom line: aside from the news of Amazon buying Whole Foods which has the Market all atwitter, the economic and political news flow is not what I would call upbeat.  I have said this before; but at some point, bad news will be bad news.  Clearly, I have no idea when.

            Lots of rationalizations/explanations for the Market strength.  Here is another one.  Any or all of these theories could be right.  I don’t think so; but I will continue to present them so that you can decide.

            On the other hand (short):

            My thought for the day: we are currently in one of those periods in which there is a reality gap between the results of fundamental analysis and ‘what is’ which makes those results of fundamental analysis difficult to exploit.

       Investing for Survival
            The formula behind buy low/sell high.


    News on Stocks in Our Portfolios

   This Week’s Data

            The first quarter US trade deficit was $116.8 billion versus expectations of $122.6 billion.


            How the financial system keeps skirting Dodd Frank (medium):

            The illusion of declining debt to income ratios (medium);

            Trump and the debt ceiling (medium):

            More on auto loans (medium):



  International War Against Radical Islam


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