Tuesday, January 9, 2018

The Morning Call---Trump's trade rhetoric

The Morning Call

1/9/18

The Market
         
    Technical

The indices (DJIA 25283, S&P 2747) had a mixed day (Dow down, S&P up)---a pause that is not surprising given the recent strong pin action. Volume remained high and breadth strong.  Long term, they 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. 

The other indicators (VIX, TLT, UUP, GLD) are not trading like the economy is strengthening/interest rates are rising; but there is some inconsistency in their pin action.

I remain uncomfortable with the overall technical picture.

            Everything is overbought (short):

    Fundamental

       Headlines

            Two developments this week that bear watching:

(1)   fourth quarter earnings reporting season begins.  I thinks the odds are high that it will be generally upbeat; and given the current euphoric investor psychology, any bad news will likely overlooked.  In short, it will probably add fuel to the current market moon shot,

(2)   the Donald is out vowing to impose tariffs on China, Mexico and anyone else in his sights.  I have long made the point that free trade is a significant source of economic growth not just for the US but for our trading partners.  Granted trading arrangements need to be revised on a periodic basis as economic circumstances change (NAFTA).  In addition, when there is blatant thievery going on (Chinese pilfering of our intellectual property) stern action is required; certainly more than was forthcoming in prior administrations.  My concern here is the balance and, as usual, it is tough to gauge when Trump uses his ‘art of the deal’ rhetoric.  Hopefully, that is all that it is happening and the US can make the proper adjustments without causing some kind of trade war.  Because if it is more than that, then even my economic growth forecasts may turn out to be optimistic.  I remind you that the Smoot Hawley Act in the late 1920’s was a primary contributor to the depression.

       Investing for Survival
   
When to sell.

            Stock allocations approaching dotcom levels (medium):       
               
                Bob Farrell’s 10 rules (medium):

            Everyone knows pension plans are screwed (medium):

Economics

   This Week’s Data

       US

            November consumer credit grew $28 billion versus expectations of up $18 billion.

            The December small business optimism index came in at 104.9 versus forecasts of 107.9.

      International
           
November German factory orders fell 0.4%.

            ***overnight, Japan reduced the size of its bond purchase program (the beginning of the end of Japanese QE?), China lowered its support of the yuan and November German industrial production rose 3.4% versus estimates of up 1.7%.

   Other

            Update on big four economic indicators (medium):

            EU economic confidence at two decade high (medium):

            Update on lumber prices (short):
           
Five oil market myths (medium):

What else I am reading today

            Five ways to invest in this hot market (beware of his last recommendation):

                The fatal mistake crypto currency investors are making (medium and a must read):

                What we need is a bigger f**k it bucket (medium):

            The Michelangelo sculpture that was sold for scrap (medium):

                Progress in Korea (medium):


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