The Morning Call
1/15/15
The Market
Technical
And the beat
(volatility) goes on. Stocks opened down
huge, fell lower but managed to rally late in the day to cut losses. Still, the indices (DJIA 17427, S&P 2011)
closed within uptrends across all
timeframes: short term (16387-19157, 1894-2286), intermediate term (16405-21570,
1729-2443) and long term (5369-18860, 783-2083); although they remained below
their 50 day moving average.
Initial trading
pushed the Averages below the lower boundaries of the developing pennant
patterns that we have been watching.
However, after the late day move up, they closed right on those lower
boundaries. Hence, these pennant
formations are still intact. On the
other hand, the follow through to the downside was in line with expectations pursuant
to Tuesday’s outside down day.
Volume
was up slightly; breadth was negative, though not nearly as much as I would
have expected. The VIX rose again, trading
intraday above the upper boundaries of both its short term trading range and
its intermediate term downtrend. Nevertheless, it finished above its 50 day
moving average and within its short term trading range and intermediate term
downtrend.
The
long Treasury moved higher, ending right on the upper boundary of its short
term uptrend, above the upper boundary of its intermediate term uptrend, within
its long term uptrend and above its 50 day moving average.
GLD
rose, trading intraday above the upper boundary of its intermediate term downtrend
and then falling back for the second time in as many days. It closed within its very short term uptrend,
its short term trading range and slightly below the upper boundary of its
intermediate term downtrend.
Bottom line: yesterday
morning broke to the downside out of their developing pennant formations, then
recovered late in the day to remain within them. In effect, that makes a third higher low and
leaves those pennant patterns intact. So
despite the down close in prices, that intraday recovery could be viewed
positively. On the other hand, the
follow through on Tuesday’s outside down day is a negative. In short, this pin action is just more of the
same schizophrenic behavior with which we have been suffering since the first
of the year. I remain directionally clueless.
Five
charts for the fully invested (medium):
Fundamental
Yesterday’s
US economic indicators presented some pretty surprising results: weekly
mortgage and purchase applications soared largely on the recent decline in
interest rates; December retail sales were quite negative though the media
trooped all manner of pundits before the public poo pooing the numbers and
providing endless reasons why they should be ignored; November business
inventories were below estimates and sales were even worse; finally the latest
Beige Book was released and served the usual gruel of modest and to moderate
growth; but (perhaps not) surprisingly lower oil prices were referred to 45
times and not in particularly positive ways.
The big stat was retail sales and I am not buying the apologists
arguments.
Overseas, the
ECJ advocate general ruled that EU QE was compatible with EU law (good luck,
Mario); Russia announced a 10% budget cut, while the World Bank estimated its
GDP would contract 2.9% in 2015 (not helping the global economic outlook); Abe
announced his biggest budget ever but with less borrowing (good luck with that);
and copper plunged to a 5 year low. My
take is that we got good news that only Dreamweaver’s could love and bad news.
***overnight,
the central bank of India joined the easy money crowd and lowered interest
rates; the Swiss National Bank pushed its already central bank rate further
into negative territory (-0.75%); BofA missed revenue and earnings estimates;
and the clincher, Russia cut all gas deliveries through Ukraine (to six EU
countries).
The
last nail in yesterday’s Market’s coffin was a disappointing earnings report
from our ‘fortress’ bank---JP Morgan.
And,
of course, Jamie Dimon pissed and moaned and made excuses (short):
Bottom
line: on top of some confusing news both
here and abroad, for a third day in a row, investors got unexpectedly smacked
with a severe case of cognitive dissonance (disappointing earnings) that even
higher oil prices couldn’t overcome. How
long this can go on (on the assumption that it does go on) before it is
acknowledged as a pattern, is the $64,000 question.
A
check on S&P forward earnings estimate (short):
Investing for Survival
The
price to book ratio (medium):
Subscriber Alert
The
stock price of Nucor (NUE) has fallen below its Stop Loss Price. Hence the Dividend Growth Portfolio will Sell
its position at the Market open.
ETF Highlights
Blackrock Investment Quality
Muni Trust (BKN) is a perpetual closed-end municipal
bond fund. BKN commenced operations in February 1993 with the investment
objective to provide high current income, exempt from regular Federal income
tax, consistent with the preservation of capital. All of the securities in the
portfolio are rated at least investment grade or determined by the Adviser to
be of equivalent credit quality at time of purchase. Its expense ratio is 1.54% and its yield is
6.1%. The ETF Portfolio owns a full position
in BKN.
News on Stocks in Our Portfolios
o
Alongside BlackRock's (NYSE:BLK) Q4 results, the company boosts the
quarterly dividend by 13% to $2.18 per share (2.5% annualized yield) and
approves the repurchase of another 6M shares under the existing buyback
program.
o Total AUM of $4.652T up 8% Y/Y. Adjusted operating margin of 43.6%
up 90 basis points. Share count of 170.4M down from 173M. Adjusted EPS of $4.82
down a dime from a year ago.
o Retail: Q4 net inflows of $22.954B; Dec. 31 AUM of $534B, 12% of
total.
o iShares: Q4 net inflows of $44.189B; Dec. 31 AUM of $1.024T, 24%
of total.
o Institutional: Q4 net inflows of $20.672B; Dec. 31 AUM of $2.775T,
64% of total.
o
Conference call at 8:30 ET
|
·
Fastenal (NASDAQ:FAST):
Q4 EPS of $0.40 beats by $0.01.
·
Revenue of $926.25M (+13.8%
Y/Y) misses by $9.59M.
Economics
This Week’s Data
November
business inventories rose 0.2% versus expectations of +0.3%; unfortunately,
sales fell 0.2%.
The
Fed released its latest Beige Book. It
contained the usual diet of modest to moderate growth for various geographic
areas; though it mentioned oil prices 45 times (and they didn’t suggest lower
prices were an unmitigated positive).
Weekly
jobless claims rose 17,000 versus estimates of up 1,000.
The
future of jobs (short):
December
PPI came in at -0.3% versus forecasts of -0.4%; ex food and energy, it was
+0.3% versus consensus of +0.1%.
The
January NY Fed manufacturing index was reported at 9.95 versus expectations of
5.0.
Other
Why
Draghi will disappoint (medium):
Politics
Domestic
Three ways Congress
screws the American people (medium):
International War Against Radical Islam
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