The Morning Call
5/18/15
The
Market
Technical
Monday Morning Chartology
On
Friday the S&P consolidated its move above the trend line of lower highs as
well as its prior high. That negates the
former. If it remains above its former
high today, it will negate a very brief very short term trading range. That would leave it with just one marker (the
upper boundary of its long term uptrend) to challenge before having no visible
overhead resistance. I continue to believe
that it will be unsuccessful in rising above that boundary to any meaningful extent.
After
almost of month of a steady downdraft, the long Treasury managed to have a good
day on Friday. Since TLT was near the
lower boundary of its short term downtrend, a rebound was to be expected. However, weighing the fundamentals (1) weak
economic numbers {suggesting lower yields} [2] against with the rising debate
regarding an overextended QE {central banks own such a huge portion of the government
debt market there is little left to buy} coupled with declining liquidity among
the fixed income market makers {suggesting higher yields}, I come out confused
enough by all this that I think the right strategy is to wait for more data.
GLD
stuck its head above the neck line of the head and shoulders pattern,
barely. If it remains there through
Tuesday’s close, it will negate than pattern and the short term trend will
re-set to up. I am not holding my breath. On the other hand, it does add to the
confusion over bonds’ pin action. That
is, if both are signaling s stronger economy/higher inflation, then I have no
idea what to make of 16 weeks of poor economic data with no end in sight. There is an outside chance that the stock
market is odd man out and we are headed for another episode of
stagflation. Outside chance being the
operative words.
The
VIX sold off last week, leaving it below its 100 day moving average and the
lower boundary of its very short term downtrend---positive for stocks. It is getting close to the lower boundaries
of its short and long term trading ranges.
The nearer it draws, the more attractive it is as a portfolio insurance.
Fundamental
Overnight
from Greece (medium):
Investing
for Survival
12
things I learned from Morgan Housel: Part 7
7. “Saving can be more important than investing.”
“The most powerful way to grow your money is learning to
live with less, since you have complete control over it.”
It is
reasonable to assume that over long periods of time the return on stocks will
be about 6% more than the return on cash. You can quibble with that estimate
but not too much. The idea that you can invest your way to retirement is simply
not possible without savings. This is especially true since most investors
chase performance and earn less that an average return of the market,
especially after fees and expenses. “Boston College’s Center for
Retirement Research found that the for
creating a retirement nest egg are one’s savings rate and the age of
retirement. “If people could work until they’re 70, they would have a much
higher chance of having a secure retirement. Social Security is higher if you
wait until age 70, and it gives your 401(k) assets a longer chance to grow, and
it reduces the number of years you have to support yourself,” says Alicia
Munnell, the center’s director. Less important was the rate of return earned on
investments.”
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