The Morning Call
6/18/15
The
Market
Technical
The Averages
(DJIA 17935, S&P 2100) lifted again yesterday. While both closed above their 100 day moving
averages, they ended mixed with respect to the upper boundary to their very
short term downtrend (the Dow above, the S&P below). So the very short term technical picture remains
a bit unclear. Nonetheless, the indices
have bounced off their 100 day moving averages again; and that is a plus for
stocks. Although there still needs to be
some follow through.
Longer term, the
Averages remained well within their uptrends across all timeframes: short term
(17398-20204, 2047-3026), intermediate term (17578-23720, 1845-2613) and long
term (5369-19175, 797-2138).
Volume rose; breadth
mixed. The VIX declined again,
finishing back below its 100 day moving average (a mild positive for stocks) and
within a very short term downtrend (also a plus) and a short term trading
range.
The long
Treasury took another hit on elevated volume, ending below its 100 day moving
average and the upper boundaries of very short term and short term downtrends.
GLD was up, but continues
directionless below its 100 day moving average and the neck line of the head
and shoulders pattern. Oil fell slightly,
closing below the upper boundary of its short term trading range. The dollar got
whacked, finishing below its 100 day moving average and within a very short
term downtrend and a short term trading range.
Bottom line: you
can’t argue with an up close especially when the indices bounced off of their
100 day moving averages---a major support level for the last two years. Now they need to follow through to the
upside.
The pin action
in the dollar and the long Treasury traded as though higher rates were in the
cards nearer term, seemingly at odds with equities.
Stock
performance in the 60 days following an FOMC meeting (short):
Fundamental
Headlines
Only
one minor data release yesterday: mortgage and purchase applications were
down---leaving a bit of a confused picture in the housing market following
Tuesday’s poor housing starts but robust building permits.
Again,
foremost on investors’ minds were:
(1)
the policy statement and Yellen press conference following
the close of yesterday’s FOMC meeting.
To summarize: [a] interest rates remained unchanged, [b] the narrative on
the economy was more upbeat than the prior FOMC meeting statement, although the
2015/2016 economic forecasts by the individual Fed members were lower than
those from the prior Fed meeting {and yes that is confusing and likely an
indication that the Fed is clueless}, [c]
even more confusing, while the economic forecasts were lower, the
interest rate outlook was for an increase or maybe two in 2015, [d] and to put
a cherry on top, Yellen said that were rates to be raised in 2015, any further
bump in rates will likely be few and far between even if all the Fed’s economic
objectives are achieved. Just to be sure
you got all that, the Fed said economic conditions are improving but its
forecasts are being lowered, but it will most likely raise rates anyway, but if
they do it, it will be a protracted affair irrespective of whether the economy
is hitting the Fed’s objectives.
Summary from Fed whisper Hilsenrath (medium):
Here are some of the forecasts:
Great
analysis on any rate hike and what it might mean (medium):
A great
editorial on Fed policy from a former Fed staffer at the Dallas Fed (medium
and a must read):
***overnight,
the Swiss National Bank left its key interest rate unchanged at -.75% despite a
declining CPI and an economy on the verge of recession; the central bank of
Norway lowered its key interest rate; UK May retail sales were better than
anticipated.
(2)
harsh words continued to fly between the Troika and the
Greeks, suggesting that no one is working too hard to actually seek some sort
of compromise in the bailout standoff.
Not helping matters, as this is being written, crowds are in front of
the Greek parliament building supporting the government refusal to bend to the
Troika demands.
Signs that a Grexit are imminent (medium):
One thing both
sides seem to agree on are the tough economic consequences if Greek exits the
EU. What nobody is talking about are economic
conditions in Greece [and southern Europeans] before and after their entry into
the EU (medium and today’s must read):
***overnight,
after appearing to blink ever so slightly on pensions, now the Troika is
hinting at debt relief (medium):
Bottom line: the
Fed completed another rendition of a classic Abbott and Costello routine. (Who’s on first?): Conditions are better but we are lowering our
forecast; however, we still expect to raise rates this year; but it will only
be a token; and even if the economy achieves our objectives, we still won’t
push rates higher. What this means to me
is that Yellen et al are in deep prayer mode, knowing that they have totally
f**ked the pooch and hoping that they can bulls**t their way out of it. And you know what? If the recent history of blind investor
acceptance is any guide, they might get away with it, at least for a while
longer. Sooner or later, the piper has
to be paid.
The Greek bail
out discussions are going nowhere; and with the great unwashed masses
congregating in front of government buildings supporting the current hard line,
it is difficult to see how that leaves much negotiating room. That said, this ‘crisis’ has been going on
for years. So what is a couple more between friends? On the other hand, in fairness to the Fed, I suspect
that at least part of their green apple two step yesterday was their concern about
the economic impact of a Grexit. And if
those guys (gal) are worried maybe caution isn’t such a bad thing.
Return
of the bond vigilantes? (short):
More
on the Chinese stock market (short):
Demographics
and market returns (medium):
Economics
This Week’s Data
May
CPI was reported up 0.4% versus expectations of up 0.5%; ex food and energy, it
was up 0.1% versus estimates of up 0.2%.
Weekly
jobless claims fell 12,000 versus forecasts of down 4,000.
The
first quarter US trade deficit came in a $113.3 billion versus consensus of
$116.5 billion,
Other
Business
cycle risk report (medium):
CPI,
PCE and profit margins (medium):
Politics
Domestic
Club for Growth
on Trump (short):
International War Against Radical
Islam
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