The Morning Call
8/21/15
The
Market
Technical
The indices
(DJIA 16990, S&P 2035) had another rough day yesterday. The Dow remained
[a] below its 100 and 200 day moving averages, both of which represent
resistance, [b] below the lower boundary of its a short term trading range
{17385-18295} for a second day; if it finishes below that boundary today, it
will re-set to a short term downtrend, [c] in an intermediate term trading
range {15842-18295} and [d] in a long term uptrend {5369-19175}.
The S&P
finished [a] back below its 100 day moving average, leaving it as resistance,
[b] below its 200 day moving average; if it remains below that MA through the
close next Tuesday, it will revert from support to resistance, [c] below the
upper boundary of a very short term downtrend, [d] below the lower boundary of
its short term trading range {2043-2135}; if remains there through the close on
Monday, it will re-set to a downtrend and [e] within an intermediate term
uptrend {1889-2651} and a long term uptrend {797-2145}.
Volume was up;
breadth was negative (as you might expect), though the Market has pushed into
very oversold territory. The VIX was up 25%,
[a] ending above 100 day moving average for a second day; if it remains there
through the close today, it will revert from resistance to support and [b] within
a short term trading range, an intermediate term downtrend and a long term
trading range.
Big
cap stocks are starting to break down (short):
The long
Treasury was strong again, ending [a] above its 100 day moving average, now
support, [b] within short and intermediate term trading ranges and [c] above the
lower boundary of a very short term uptrend.
GLD spiked
again, still closing below its 100 day moving average and in short,
intermediate and long term downtrends.
However, it is in a very short term uptrend, which could potentially be
signaling that a bottom has been made. It
is still too soon to be considering buying GLD on anything other than a trading
basis; but if a serious challenge of this uptrend can be thwarted, then there
might be.
And:
Oil was down
again. It finished below its 100 day
moving average and within short and intermediate term downtrends. The dollar fell,
closing back below its 100 day moving average, which represents resistance. It is also within short and intermediate term
trading ranges.
Bottom line: more
serious technical damage was done to the Averages yesterday. They closed in oversold territory, so a
bounce in here would not be surprising.
But the key is follow through. And,
if to the upside, will that it negates the challenges to those multiple trend line
breaks?
This is not a
technical environment in which I would be buying stocks; unless I was a day
trader. Any move higher in prices I
believe represents a gift to allow investors to sell.
TLT continues
its recent recovery, reaffirming the no Fed rate hike and/or a weakening
economy scenario. GLD continues to hint
a bottom, though we won’t know until its very short term uptrend successfully
holds off a challenge.
Fundamental
Headlines
Yesterday’s
US economic news was mixed: the August Philly Fed manufacturing index was
better than expected, July existing home sales were much better than
anticipated, weekly jobless claims were mildly disappointing and July leading
economic indicators were really disappointing.
Nevertheless, the economic data this week in total is going to be negative;
the first time in a number of weeks.
Overseas,
the news remains dismal: the Chinese stock market was off 3%, Kazakhstan
devalued its currency and Brazil reported unemployment up for the seventh month
in a row.
***overnight,
the August Chinese manufacturing PMI was down for the fifth month in a row,
stocks were off 4%, but the government defended the yuan; the August EU manufacturing
PMI was flat.
Bottom line: the
negative dataflow on the global economy is gaining momentum. Maybe this is just a brief outlier. The other alternative, of course, is that
recession/deflation is starting to become manifest. We won’t know for a couple of weeks; but
clearly, economic conditions are not looking that promising as of the close
last night.
Aggravating this situation is investor
realization that the Fed is clueless, that it has no idea how to extract itself
from an intractable situation of its own making; and as a consequence, it has
lost or is losing investor confidence that it is capable of ‘having the Market’s
back’.
Another must
read from David Stockman (medium):
I said yesterday
that ‘the only question is when the Market dreamweavers will come to realize
that’. Maybe we have reached that point; maybe
not. But it doesn’t change the thesis
that there is a disconnect between valuations and fundamentals; and sooner or
later, that spread will mean revert.
I continue to believe
that the key investment strategy today is to take advantage of the current high
prices to sell any stock that has been a disappointment or no longer fits your
investment criteria and to trim the holding of any stock that has doubled or
more in price. They soon may not be
available.
All
bubbles are different (medium and today’s must read):
Economics
This Week’s Data
The
August Philadelphia Fed manufacturing index came in at 8.3 versus estimates of
7.5.
July
existing home sales rose 2.0% versus forecasts of down 1.5%.
July
leading economic indicators fell 0.2% versus consensus of up 0.2%.
Other
Politics
Domestic
International War Against Radical
Islam
Comments
from Iran (short):
War heats up on Syrian/Israeli
border (medium):
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