The Morning Call
7/10/15
The
Market
Technical
The indices
(DJIA 17548, S&P 2051) managed to only rebound weakly yesterday. Both remained below both their 100 and 200 day
moving averages. The Dow closed below
the lower boundary of its intermediate term uptrend for the second day (if it
remains there though the close Monday, the trend will be negated) and right on
the lower boundary of its short term uptrend.
Under our time and distance discipline it has to move back above that
level to void the break (if it stays below that lower boundary through the
close today, the trend will be negated).
The S&P ended below the lower boundary of its short term uptrend for
the second day (if it remains there through the close today, the trend will be
negated).
Everything that
you wanted to know about the 200 day moving average but were afraid to ask
(medium):
Longer term, the
Averages are, for the time being, in uptrends across all timeframes: short term
(17548-20354, 2068-3047), intermediate term (17746-23888, 1861-2629) and long
term (5369-19175, 797-2138).
Volume rose;
breadth improved. The VIX was up which
is a bit unusual on an up Market day. It
ended above its 100 day moving average and very near the upper boundary of its intermediate
term downtrend.
The long
Treasury got spanked for about 2%, finishing below its 100 day moving average
and the upper boundary of its short term downtrend.
GLD was up fractionally,
closing below its 100 day moving average and the neckline of the head and
shoulders formation and very near the lower boundary of its intermediate term
trading range.
The dollar rose slightly;
oil was up about 2%, but still below its 100 day moving average and near the
lower boundary of its short term trading range.
Bottom line: after
a strong open, the Averages finished very near Wednesday’s close. Not much of a bounce; and it did very little
to correct the technical damage done on Wednesday as the indices are
challenging multiple support levels. So
the follow through was pretty dismal.
However, stocks are still oversold; and while the ‘buy the dip’ crowd
didn’t have much firepower yesterday, more damage is needed before they can be
summarily dismissed. Keep you helmets
on.
The
perils of margin debt (medium):
Fundamental
Headlines
Yesterday’s
US economic stats were mixed: weekly jobless claims were disappointing while
June retail chain store sales improved. That
leaves the weekly dataflow also mixed.
No
international economic numbers yesterday.
The
latest from Greece is that the government has submitted its new, new, new plan
as of last night. The EU financial
ministers will consider it today and the big guys meet on Sunday to approve/disapprove
the Greek proposal. Even though this get
together has been characterized as the final judgment day, we have been through
so many of these, I hesitate to accept that.
Indeed, this whole affair has morphed from a five act tragedy to a daily
soap opera that just goes on and on. All
we can be sure of is more drama.
***overnight,
the proposal submitted by Tsipras appears to mirror an earlier plan from the
Troika---which incidentally was the plan voters rejected in the referendum. Drinks all around
http://www.zerohedge.com/news/2015-07-10/tsipras-sells-out-referendum-no-vote-ahead-weekend-deadline
The
Chinese market aided by still more market intervention managed a rebound. That seemed to cool concerns; though, judging
by yesterday’s pin action, not by much. The
big question is, how persuasive for investors will the massive intervention of
the government be (i.e. will they stop selling)? I noted yesterday that I was skeptical that it
would work because these measures have stymied price discovery. On second thought, I realized that our own
Fed has done the same thing for the last four years only not on such a grand scale;
and to date, it has been successful and it has had to face a lot more
sophisticated group investors than the Chinese.
That said, it would indeed be ironic if the great unwashed masses in
China (now at the wrong end of a gun) continue to call bulls**t on their government
while our own erudite counterparts spend their time waiting with bated breath
for the next pearl of wisdom out of Yellen’s mouth. None
of this answers the question I posed above except as it relates to whether or
not the Chinese are and we may soon be having an ‘emperor’s new clothes’
moment.
***overnight,
Chinese stocks are up for a second day on additional moves (mandated stock buy
backs) by the Chinese government. Bartender,
a second round.
The
worst is not over in China (medium):
A
more optimistic take (medium):
Bottom line: ah, a new day is dawning. The Greek bailout is solved and the Chinese
market is rallying. Maybe. In my opinion, it is debatable whether any
deal based on the submitted proposal is a win for the Greeks. Yes in the short run, it keeps them on life
support and some of the measures being forced on them are necessary; but
without debt relief, the country is still f**ked. As for China, how do you have a functioning
capital market when investors know that if they buy a stock, there is a chance they
will be put in jail for selling it?
In my opinion, if
you are still 100% invested, take advantage of any rally on the above good news
and lighten your positions. If you do
and the Market soars to new heights, it likely won’t be the worst investment
decision that you have ever made in your life.
If you don’t and stock prices mean revert, it may be in the top ten.
Economics
This Week’s Data
June
retail chain store showed improved year over year growth.
Other
The
Chicago Fed’s national financial conditions index is not looking good (short):
Politics
Domestic
What climate wars
did to science (medium):
International War Against Radical
Islam
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