The indices (DJIA 21235, S&P 2429) were down on the day. But the Dow remained above its former high (second day) and the S&P’s follow through from Friday’s outside down day was very feeble. That seems to indicate that Friday’s pin actin was much ado about nothing, and as a result, supports my conclusion that the move up is not over. Volume was up and breadth was weak.
Unlike the S&P, the VIX (11.5) did have some follow through from its Friday outside up day, gaining 7%. Intraday it tested its 100 day moving average but failed to close above it. It remains below its 200 day moving average and in a short term downtrend.
The long Treasury was down slightly (again), leaving it below its 200 day moving average but above its 100 day moving average and in a very short term uptrend. The gap between the upper boundary of its short term downtrend and lower boundary of its long term uptrend continues to narrow.
The dollar was also down, leaving its chart with an ugly look---ending in a very short term downtrend and below its 100 and 200 day moving averages.
GLD fell further, but finished above its 100 and 200 day moving averages. Plus, the 100 day moving average is about to cross above its 200 day moving average which is usually a positive technical signal. However, this chart is getting a bit ugly. It is somewhat unusual for GLD and UUP to both be forming negative chart patterns since they tend to trade inversely (weak dollar = strong gold).
Bottom line: yesterday was a bit anticlimactic following the indices’ unusual pin action on Friday, leaving intact my assumption that the momentum remains to the upside. Bonds, gold and the dollar turned in a mixed overall performance.
Yesterday was a slow for economic data: one US stat---the May federal deficit was larger than had been expected. However, things will heat up later this week as we will get several primary indicators as well as the FOMC meeting. Nothing overseas.
***overnight, May German investor confidence unexpectedly declined; May UK CPI came in hotter than anticipated.
The media circus that is our political class continues as the congressional hearings on possible Trump infractions resume, the Donald tries to snatch defeat from the jaws of victory as he blasts Comey after his testimony revealed no Trump wrong doing and now two state attorneys general are filing suit against Trump alleging his business assets represent a conflict of interest and are unconstitutional. It is hard to see a lot of progress on the Trump/GOP fiscal agenda in the midst of this ridiculous atmosphere.
Treasury releases proposed changes in bank regulation (medium):
More on Dodd Frank (medium):
Even more (medium and a must read):
Bottom line: historically, I have been a big fan of political gridlock simply because I believe, in general, that the best legislation is no legislation. And that could very well be case here, if the Trump/GOP agenda would increase the federal debt/deficit. However, I don’t think that all those dreamweavers out there are buying stocks because the economy and corporate profits are going to grow in the absence of Trump/GOP fiscal program.
Of course, as long as all news is good news, none of this will matter; and until some factor alters current Market psychology, investors will likely continue to bid up stock prices as they have been for the last two years.
Animal spirits are a late stage occurrence (medium):
My thought for the day: at times, it may seem as if the market is out to get you. But that’s not the case. It’s your own mental framework that determines how you perceive the information and whether or not you can be respond unemotionally to the data and take advantage of whatever the market is offering.
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This Week’s Data
The May federal budget deficit was $88.4 billion versus forecasts of $87.0 billion.
The May small business optimism index came in at 104.5 versus expectations of 104.0.
May PPI was reported at 0.0% versus estimates of +0.1%; ex food and energy, it rose 0.3% versus consensus of +0.2%.
How the next financial crisis won’t happen (medium):
Global credit growth is slowing (medium):
OPEC oil production the highest in six months (medium):
International War Against Radical Islam
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