Wednesday, July 12, 2017

The Morning Call---At least they are trying

The Morning Call


The Market

The indices (DJIA 21409, S&P 2425) experienced a volatile day but ended basically flat (Dow up, S&P down slightly).  They remain in a narrow one month trading range, but we have seen this pattern before over the last year---and it has always been resolved to the upside.  Since they retain their upward momentum as defined by their 100 and 200 day moving averages and uptrends across all timeframes, I see nothing, technically speaking, to inhibit the Averages’ challenge of the upper boundaries of their long term uptrends---now circa 24198/2763.  We need to say cognizant of the recent weak volume and breadth; though that is likely a function of the summer doldrums.

The VIX (10.9) fell 2%, remaining stuck 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 was up, sufficiently to regain the lower boundary of the very short term uptrend which was negated on Monday.  Usually when there is a sudden reversal in price the day after a trend change, I put the call in abeyance subject to follow through in either direction. It remained below its 200 day moving average for the fourth day which resets it from support to resistance.  However, it is a short hair away from regaining that level.  So if TLT rallies again today, I will probably suspend that call awaiting follow through.  I noted yesterday, that TLT’s recent move lower could be a sign of a change in bond investors sentiment; now it looks like it could be a sign of a bottom---again ‘could be’ being the operative words.

The Fed and interest rates (medium):

The dollar resumed its decline, ending in a very short term downtrend and below its 100 and 200 day moving averages, supporting the notion that bonds could have found a bottom.

GLD was up, but did little to enhance an otherwise lousy chart.

Bottom line: even on a volatile, low volume, weak breadth day, the Averages managed to close within a very tight one month trading range.  I could quote any number of headlines that would normally cause investor heartburn---‘normally’ being the operative word.  Today all news is still good news.  I have no insight into how long this psychology will last; but it seems reasonable to assume that, technically speaking, the indices next big move will be to challenge the upper boundaries of their long term uptrends.


            Yesterday’s economic news remained discouraging: growth in month to date retail chain store sales slowed, the June small business optimism index was below forecasts and while May wholesale inventories were slightly better than projected, sales were down markedly.

            On fiscal policy:

(1)   the Trump administration took another hit over its potential Russian connection, as Trump Jr. was accused of having met with a Russian official that promised damaging information on Hillary.  Subsequently, junior released all the emails associated with the contact.  You can read them below and decide for yourself if there is some sort of smoking gun.  But in doing so, remember that ‘treason’ as defined by the Constitution is aiding an enemy in war.  There is a campaign finance law that prohibits soliciting contributions from a foreign entity---sort of like the Clinton Foundation did.  But as you can see in the link, the Russians pulled a bait and switch, i.e. promised information but asked for help.  I hate getting involved in the Washington he said, he said bullsh*t, but I mention this because of its potential to delay and defer the Trump/GOP fiscal agenda.

(2)   on the other hand, senate majority leader McConnell canceled first two weeks of August recess in order to work on healthcare reform and tax cuts and said that a new healthcare bill will presented tomorrow. It is encouraging that they are trying.  But forgetting the lack of support from the dems, the current dissension in the GOP ranks raises the question whether this action is just another jerk off session.  Clearly the senate finding agreement on healthcare reform would be a refreshing step forward.

            On monetary policy, in the face of Yellen’s testimony and the release of the latest Fed beige book, none other than Jamie Dimon says the Fed has no clue what it is doing (medium):


Bottom line: the good news is that at least the GOP senate is trying to move the Trump/GOP fiscal program forward (‘trying’ being the operative word).  The bad news is the economy continues to struggle and the Fed seems to be ignoring it.  We will, perhaps, know more about monetary policy direction by the end of the day; but then again we may not.  And if we do know more, it won’t change the fact that the Fed has mismanaged the transition from easy to normal monetary policy---again.  And that, in my opinion, is not good news for stocks.

            June’s dividend tally (short):

            My thought for the day: I designed my pricing discipline on the principle that the key to making money was how I managed being wrong.  It matters less whether I am right or wrong on an investment and more on how much money I lose when I am wrong and how much money I make when I am right.  My Stop Loss discipline keeps my losses manageable while Sell Half discipline means that I only take profits at valuation extremes.

       Investing for Survival
            Ten things to give up if you want to save more money.

    News on Stocks in Our Portfolios
Cummins (NYSE:CMI) declares $1.08/share quarterly dividend, 5.4% increase from prior dividend of $1.025.

Procter & Gamble (NYSE:PG) declares $0.6896/share quarterly dividend, in line with previous.


   This Week’s Data

            Month to date retail chain store sales grew slower than in the prior week.

            May wholesale inventories rose 0.4% versus estimates of up 0.3%; but sales fell 0.5%.

            Weekly mortgage applications dropped 7.4%, while purchase applications were down 3.0%.


            Peak oil demand (medium):


            OPEC admits it has a problem (medium):



This is a pretty fair assessment of the Comey email brouhaha (medium):

  International War Against Radical Islam

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