Wednesday, September 20, 2017

The Morning Call--All eyes on the Fed

The Morning Call

9/20/17

The Market
         
    Technical

The indices (DJIA 22370, S&P 2506) moved slightly higher yesterday, both closing again on all-time highs.  Volume fell; breadth continued strong.  Both remain above their 100 and 200 day moving averages and are in uptrends across all time frames. 

The VIX (10.0) was up fractionally.  It is below the upper boundary of its short term downtrend, below its 100 day moving average (now resistance) and below its 200 day moving average (now resistance).  It is drawing near its former all-time low; but the question as to whether or not the VIX has bottomed remains open.

The long Treasury declined, but still finished above its 100 and 200 day moving averages (both support) and the lower boundaries of its short term trading range and its long term uptrend.  However, it has broken its trend of higher lows. 

The dollar fell, remaining in short term and very short term downtrends and below its 100 and 200 day moving averages and in a series of seven lower highs. 
           
GLD gained on the day, ending above its 100 and 200 day moving averages (both support) and the lower boundary of a short term uptrend.  However, it closed below the lower boundary of its very short term uptrend, negating that trend.

Bottom line: long term, the indices remain strong viz a viz their moving averages and uptrends across all timeframes. Short term, they closed above the resistance level marked by their August highs, meaning that there is no resistance between current price levels and the upper boundaries of the Averages long term uptrends.

On the other hand, all those gap openings among the major indices still need to be closed. 

Finally, the yesterday’s pin action in TLT, GLD and UUP was mixed again viz a viz the current expected more hawkish Fed scenario---which isn’t surprising given the Fed’s history of saying one thing and doing another.

I remain uncomfortable with the overall technical picture.
           
    Fundamental

       Headlines

            Yesterday’s data releases were generally negative: the second quarter trade deficit was greater than expected, August import and export prices were much higher than estimated, month to date retail chain store sales grew slower than in the prior week and August housing starts fell versus an anticipated increase; the only bright spot was a strong rise in building permits.  Nothing overseas.

            Three mentionable news items:

(1)   Trump burned the ears of the UN crowd, giving perhaps the most aggressive speech before that group since Yasser Arafat mounted the podium with an AK 47.  I don’t see economic consequences to this harangue; though clearly his threats to North Korea and Iran will keep tensions at an elevated level,

(2)   the current path of Hurricane Jose will just touch the upper northeast at its outer bands; Hurricane Maria is pounding the Leeward Island and Puerto Rico which have already suffered mightily from Irma.  Nonetheless, at this point, it appears that the US mainland will escape major damage [or as some would have us believe, another growth opportunity],

(3)   the GOP is attempting to resurrect healthcare reform.  So far, it appears that while this effort may simplify the system, how much savings will occur is still a question.  So far, there has been no budgetary scoring.  The verbiage promises some cost savings which is one of the prime reasons for passage of the initial repeal and replace effort because it freed money to pay for tax reform.  So clearly, if it simplifies, makes the system fairer and saves money, this would be a plus.

      Comments from:

     Club for Growth:
   
     Marginal Revolution:

            Bottom line: there remains nothing in the economic data to suggest that the economy is getting better.  Indeed, I would argue the data stream portrays just the opposite.  And we haven’t begun to see the consequences of Harvey and Irma yet or those of other hurricanes which seem to be coming at a rapid rate with unusual ferocity. 

Today we will likely get another dose of Fed ‘on the one hand, on the other hand’, ‘we might, we might not’ pabulum.  The alternative is for it to announce a firm schedule for monetary normalization.  I hope it does.  But if so, the unwinding of asset mispricing and misallocation and the return of price discovery will begin.

            For the bulls (medium):

            Update on dividends in the third quarter (short):
            My thought for the day: one of the best ways of dealing with risk is to pay close attention to the price paid for a stock.  That was a primary motivation in my developing our pricing model.  A benefit is that it makes very conservative assumptions about the estimated value at which a stock is purchased. I believe that this will goes a long way towards stacking the odds in my favor of having successful outcomes over time, and can help relieve the anxiety that comes with gut wrenching market gyrations and gloomy projections of the future.
       Investing for Survival
   
            Advice for your children and grandchildren.

    News on Stocks in Our Portfolios
 
            General Mills (NYSE:GIS): Q1 EPS of $0.71 misses by $0.05.
Revenue of $3.77B (-3.6% Y/Y) misses by $20M.

            Microsoft (NASDAQ:MSFT) declares $0.42/share quarterly dividend, 7.6% increase from prior dividend of $0.39.

            MasterCard (NYSE:MA) declares $0.22/share quarterly dividend, in line with previous.

            EOG Resources, Inc. (NYSE:EOG) declares $0.1675/share quarterly dividend, in line with previous.

Economics

   This Week’s Data

            Month to date retail chain store sales grew at a slower pace than the prior week.

   Other

            Thoughts on the economic viability of wind power (medium):

            The September chemical activity barometer held steady (short):

            The next financial crisis and where it could come from (think Reinhart/Rogoff):
            The latest from Mohamed El Erian (medium):

Politics

  Domestic


  International War Against Radical Islam


Visit Investing for Survival’s website (http://investingforsurvival.com/home) to learn more about our Investment Strategy, Prices Disciplines and Subscriber Service.




No comments:

Post a Comment