Thursday, June 8, 2017

The Morning Call--There is more than just today's trifecta

The Morning Call


The Market

The indices (DJIA 21173, S&P 2433) lifted yesterday, though, for a third day, the move was small.  However, the Dow remained below its recent high; meaning that it is still not confirming the S&P’s break above its comparable level.  So, the near term technical issue remains which of these divergent trends will change direction and confirm the other.  I still believe that the Dow will ultimately trade above its high and the Averages will make a run at the upper boundaries of their long term uptrends (now circa 24198/2753).   Volume fell slightly; breadth was mixed.

The VIX (10.4) was down pennies, ending above the lower boundary of its intermediate term trading range and the lower boundary of its long term trading range.  However, it is still below its 100 and 200 day moving averages and in a short term downtrend.
The long Treasury was down slightly, closing right on its 200 day moving average (if it remains there through the close on Friday, it will revert to support) and finishing above its 100 day moving average and in a very short term uptrend. 

The dollar rallied fractionally, ending in a very short term downtrend and below its 100 and 200 day moving averages.

GLD was down pushing down off the upper boundary of its short term trading range.  This is the second unsuccessful test of that boundary; clearly it needs break above that boundary to keep its current rally in effect. It remained above its 100 and 200 day moving averages and in a very short term uptrend.

Oil took a major hit after a big build in crude inventories (short):

Bottom line: investors of all stripes seemed to take heart from the (nonsmoking gun) narrative in Comey’s prepared remarks for his congressional testimony today---stocks and the dollar were up and safe havens (TLT and GLD) down.  That said, that was just the appetizer for today’s trifecta---Comey testimony, ECB meeting and UK election.
            For the bulls (medium):



            Yesterday’s economic datapoints were mixed: weekly mortgage and purchase applications were up while April consumer credit grew much less than anticipated.

            ***overnight, the May Chinese import/export numbers were strong; first quarter Japanese GDP Grew less than expected.

            Overseas, there were no economic releases; but there was lots political news, most of which was positive:

(1)   the failing Spanish bank was bailed out, lowering the risk of any disruption in the EU financial system,

(2)   the EU is apparently set to unveil proposals for a new defense union in which it will, at a minimum, assume more financial responsibility for its defense,

(3)   the US and Mexico reached an ‘agreement in principle’ to avert a trade war over sugar,

The latter two are indications that Trump’s goal of making the US a partner but not a chump for international agreements could be working.  As you know, I believe that this country’s first obligation is to itself, including living within its means.  We can only hope that the Donald will pursue that policy domestically.
(4)   the Saudi’s issued an ultimatum to Qatar.  Plus there was a terrorist bombing in Iran [ironically, the globe’s largest state sponsor of terror].  Both of these incidents are examples of the surfacing of the historical Sunni/Shi’a rift, which adds yet another tub of dynamite to the explosive Middle East powder keg.

***overnight, Qatar’s foreign minister will visit Moscow this weekend (short):

            And Qatar puts its military on high alert (medium):

            The day’s top political event was Comey’s release of his prepared remarks to Congress.  I leave it to you to interpret his comments as you wish (medium):

            Bottom line: there was plenty about which to be encouraged in yesterday’s news flow: signs that Trump’s foreign/trade policy could be having a positive impact, there is apparently no obstruction of justice charges likely to be brought against Trump and any concerns about turmoil in the Spanish financial system have been stilled.  The first two support our recent increase in the long term economic secular growth rate assumption in our forecast.  The latter keeps the risk to the EU financial system at a tolerable level.

            The mounting problems in the Middle East, especially when they appear to be a part of a much deeper historical sectarian conflict, do raise the risk of and the potential magnitude of conflict in there region.

            The latest from Doug Kass (medium):

            My thought for the day: following on yesterday’s thought about not averaging down, this short article from a trader emphasizes that point.

       Investing for Survival
            Five universal laws of human stupidity.
    News on Stocks in Our Portfolios
General Dynamics (NYSE:GD) declares $0.84/share quarterly dividend, in line with previous.


   This Week’s Data

            April consumer credit grew $8.2 billion versus estimates of up $17 billion. 

                Weekly jobless claims fell 10,000 versus forecasts of down 7,000.




  International War Against Radical Islam

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