Wednesday, November 29, 2017

The Morning Call--Lay back and enjoy it

The Morning Call


The Market

The indices (DJIA 23836, S&P 2627) had a spectacular day, keeping the relentless move higher intact.  Volume was up: breadth again improved but again not to the extent that I would have thought given the pin action.  Nonetheless, the bottom line is that both of the Averages remain above their 100 and 200 day moving averages and are in uptrends across all time frames---with the assumption being that stock prices are going higher.

            Update on NYSE outstanding margin debt (medium):

The VIX (10.0) was up 1 ½%, closing above the lower boundary of its long term trading range, voiding last week’s challenge.  However, it finished below its 100 day moving average (now resistance) and its 200 day moving average (now resistance). 

The long Treasury rose, ending above its 100 day moving average (now support), above its 200 day moving average (now support) and above the lower boundaries of its very short term uptrend, short term trading range and long term uptrend.   It continues to trade as if the economy is weak and/or the Fed is not raising rates,

The dollar was up ½ %, but still ended below its 100 and 200 day moving averages (now resistance) and solidly within a short term downtrend and within a developing very short term downtrend---not reflective of economic strength or confidence in the US.

            Gold was off two cents, closing for above its 100 day moving average for the third day---so maybe it continues to break the gravitational hold of that MA.  I am still going to wait a couple of days before making that call.  It remained above its 200 moving average (now support) and in a short term uptrend.  Again not indicative of economic strength or higher rates.


Bottom line: hasn’t changed---long term, the indices remain strong viz a viz their moving averages and uptrends across all timeframes. Short term, they are 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. The technical assumption has to be that stocks are going higher.  If you own enough cash to sleep at night, lay back and enjoy it.
Trading in UUP, GLD and TLT are back in sync with themselves (sluggish economy, weak interest rates) but out of kilter with the VIX and stocks.  I remain confused and uncomfortable with the overall technical picture.


            Yesterday’s economic stats were upbeat: month to date retail chain store sales, November consumer confidence and the November Richmond Fed manufacturing index were all strong.  The only spoiler was the September Case Shiller home price index which rose slightly but August was revised down.  Nothing overseas.

            The three news items of the day:

(1)   Powell’s testimony before the senate banking committee, which, in tone, was a bit more dovish than his prepared remarks or anything that Yellen has said lately,

Today, Yellen takes victory lap before congress; we will be quoting this testimony one day as another example of how out of touch with reality the Fed is (medium);

(2)   the Senate budget committee passed its version of tax reform (medium):

                 Related (medium):

                David Stockman’s thoughts on the current version (medium):

(3)   North Korea fired another missile into the Sea of Japan (medium):

            Bottom line: clearly investors were focused on the first two events---which is not unexpected in this ‘everything is awesome market’.  As I noted above, if you have built cash reserves, there is nothing else to do but wait.  How long?  I have already proven I don’t have the answer to that.

       Investing for Survival
            Five morning habits that make you fat.

    News on Stocks in Our Portfolios
Tiffany (NYSE:TIF): Q3 EPS of $0.80 beats by $0.04.
Revenue of $976M (+2.8% Y/Y) beats by $19.05M.

Bank of Nova Scotia (NYSE:BNS) declares CAD 0.79/share quarterly dividend, in line with previous.


   This Week’s Data

            The September Case Shiller home price index rose 0.5% versus expectations of 0.4%; however, the August number was revised down by an equal amount.

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

            November consumer confidence came in at 129.5 versus estimates of 124.5.

            November Richmond Fed manufacturing index was reported at 30.0 versus forecasts of 15.0.

                Weekly mortgage applications fell 3.1%; however, purchase applications were up 2.0%
                Revised third quarter GDP showed growth of 3.3% in line with expectations; corporate profits rose 10.0% versus the prior reading of 7.4%.


            More economic stats from John Mauldin (medium):



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