The Morning Call
6/25/15
The
Market
Technical
The Averages
(DJIA 17966, S&P 2108) retreated yesterday.
The S&P closed above its 100 day moving average; but the Dow
finished below its comparable level.
Both ended below their prior highs (18295, 2135). Yesterday’s DJIA decline below its 100 day
moving average brings back into play the lower boundaries of the indices’
narrowing trading ranges. As was the
case to the upside, follow through is key---and not to be repetitious but the
moving averages have provided strong support over the past two years.
Longer term, the
Averages remained well within their uptrends across all timeframes: short term
(17438-20244, 2053-3032), intermediate term (17625-23767, 1849-2617) and long
term (5369-19175, 797-2138).
Volume rose; breadth
deteriorated further. The VIX was up 10%,
but remained below its 100 day moving average and within a very short term downtrend
and a short term trading range. Anything below 13, I believe offers value
as portfolio insurance.
This article
gets a little deep in the weeds; but forgetting the quantitative analysis, the
message is clear---volatility is undervalued.
The long
Treasury made a slight comeback, but still closed below its 100 day moving
average and the upper boundaries of very short term and short term downtrends.
Are bonds
breaking down (short)?
Or
perhaps said a little differently, is the long Treasury pricing in a rate hike
(short):
Or
is it liquidity or the lack thereof (medium):
GLD declined, remaining
below its 100 day moving average and the neck line of the head and shoulders
pattern. Oil was down, ending below the
upper boundary of its short term trading range. The dollar also sank and remained
below its 100 day moving average and within a very short term downtrend and a
short term trading range.
Bottom line: the
Average’s very short term trading uptrends may have come to an end yesterday but
remain caught between their former highs and their 100 day moving
averages---which, as I have noted, are shrinking in scope and but unlikely to
be resolved until we get a conclusion of the Greek bailout problem.
Stock and bond
prices continue to trade inversely.
Fundamental
Headlines
The
US economic numbers didn’t provide a lot of clarity to the outlook: weekly
mortgage and purchase applications were up slightly and final real first
quarter GDP came out in line with expectations.
One
international datapoint---June German business confidence fell for the second
month is a row.
However,
investor focus remained on the Greek tragedy, the latest episode of which
featured the IMF throwing up all over the proposal presented on Monday.
Greek
fact of the day (short and interesting):
Clearly,
time is running short; but you can never underestimate the eurocrats’
willingness to wait until the fat lady opens her mouth before an agreement is
reached. That said, the risk of a
default or a Grexit can’t be dismissed.
***what
happened overnight:
Bottom line: the
US market’s fate seems to be tied to the Greek deal; although, I am not sure what kind of upside there is since
our Models incorporate a ‘muddling through’ assumption for the global
economy. That said, I am not sure what
the downside is either. However, the
difference is that the downside (which as aside, I have no idea how to
quantify) whatever it is, is not in either our Economic or Valuation Models.
For that reason
alone, even if I was wee weeing in my pants to buy stocks, I would be doing
nothing until this situation is resolved.
Of course, I have a lot of other reasons for buying nothing with which
you are all too well acquainted.
And I am joined by
another major Market participant: Icahn
on the market (4 minute video):
Even this technician
thinks we should give it a rest. At least till November (short):
Economics
This Week’s Data
Weekly
jobless claims rose 3,000 versus expectations of an increase of 6,000.
May
personal income was up 0.5% versus estimates of up 0.4%; spending was up 0.9%
versus forecasts of up 0.7%; the PCE deflator was up 0.1%, in line.
Other
Renting
and inflation (medium):
More
on subprime auto loan securitization (medium):
Politics
Domestic
Obama’s newest
hopey, dreamy proposal help the average Joe (short):
A Senate
procedural vote assures the passage of Obama’s trade bill. I believe it an overall positive for the US
economic outlook. Yes, there were some
negatives to the bill (renewing the Import/Export bank charter); but it will
boost the growth of the economy and it shows that it is possible for our ruling
class to compromise and do what is right for the US.
International
The importance of Obama’s
Asian trade agreement (medium):
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