The Morning Call
9/15/15
The
Market
Technical
The indices
(DJIA 16370, S&P 1953) drifted lower in another quiet day. The Dow ended [a] below its 100 and 200 day
moving averages, both of which represent resistance, [b] in a short term
downtrend {16981-17900}, [c] in an intermediate term trading range
{15842-18295}and [d] in a long term uptrend {5369-19175}.
The S&P
finished [a] below its 100 and 200 day moving averages, both of which represent
resistance, [b] below the upper boundary of a very short term downtrend, [c] in
a short term downtrend {2016-2084}, [d] within an intermediate term uptrend
{1909-2682} and [e] a long term uptrend {797-2145}.
In addition, it
closed below the lower boundary of a very short term uptrend [series of higher
lows]. If it finishes there today, that
uptrend will be negated.
Volume was down;
breadth negative. The VIX (24.5) rose 4.5%, ending [a] above its 100 day moving
average, now support, [b] within a short term uptrend, [c] within an
intermediate term trading range {it remains well above the upper boundary of
its former intermediate term downtrend} and [d] a long term trading range. As long as remains roughly above the 20
level, uncertainty is at elevated levels.
Overhead
supply (short):
The long
Treasury was up slightly, remaining above its 100 day moving average, leaving
it as support and finished within short and intermediate term trading
ranges.
GLD (106) rose
fractionally, closing in downtrends across all timeframes and below its 100 day
moving average. It can still build a
bottom were it to fail to successfully challenge its July/August lows (104). But that is yet to be seen.
Oil dropped 1.5%,
staying below its 100 day moving average and within a short term trading range
and intermediate and long term downtrends.
The dollar was
up, but closed below its 100 day moving average, which is now resistance, and
within short and intermediate term trading ranges.
Bottom line: the
Averages traded below the trend line connecting a series of higher lows which
could be voided today if they remain there.
However, (1) yesterday’s close was still a higher low than the previous
low and (2) barring a major news event, I think most of the trading ahead of
this week’s FOMC meeting will be noise.
In addition, the
indices remain safely above the lower boundaries of their intermediate term
trends. As long as they are, the Market
is in a simple correction in a bull market.
The long
Treasury’s pin action continues to suggest a Fed rate hike and a stronger
economy. As you know, I don’t think that
this scenario will occur.
Fundamental
Headlines
No
US stats reported yesterday. However, we
did get mixed data from overseas: August Chinese factory output was below
expectations, while EU industrial production came in above estimates. So nothing attention getting.
***overnight,
August UK inflation was 0%, the Japanese central bank did not ease further
(which is not what an official said last week), German investor confidence
drips 50% and Chinese stocks took another big hit.
Update
on Chinese economy (short):
Citi
makes global recession in 2016 its base case (medium):
http://www.zerohedge.com/news/2015-09-14/citi-just-made-global-recession-2016-its-base-case-scenario
The
bulk of yesterday’s news flow focused on Thursday’s statement from this week’s FOMC
meeting. I continue to believe that what
the Fed does is irrelevant to the economy.
However, given investor obsession with this upcoming decision, the Fed may
have reached the point that no matter what it does, it could be viewed negatively: at the close last night, the bond market priced
a rate hike at about 28%; so if the Fed does raise rates, that could be a
disappointment to the QEInfinity crowd.
On the other hand, failure to hike rates could be interpreted as showing
the Fed’s lack of confidence in the economy which would bolster the recession/deflation
case. Meanwhile, the uncertainty is at
such a level, that investors will likely stand pat until the announcement.
Jeff
Gundlach on the Fed (medium):
Bottom
line: for me, the Fed decision on
Thursday has all the drama of an election in a one party state. Because whatever it does, the outcome is
going to be the same---an undetectable impact on the economy and a further
cementing of the idea that the Fed is lost, confused and is clueless about what
it should do because its QEInfinity policy is so historically unprecedented
that it has no idea what will happen next to the one sector that QE has affected;
and that is asset pricing and allocation.
That, of course, has relevance to my bottom line which is that stocks
are overvalued.
That said, I continue
to believe that the technicals have the upper hand in determining Market
direction over the short term.
This is a time
to do nothing.
The
latest from Doug Kass (medium):
Economics
This Week’s Data
August
retail sales were reported at +0.2% versus expectations of +0.3%; however, July
sales were revised from +0.6% to +0.7%.
Ex autos and gas, the September number was +0.3% versus estimates of
+0.4%, but July was revised from +0.4% to +0.7%.
The
September NY Fed manufacturing index came in at -14.67 versus forecasts of -.5.
Other
Politics
Domestic
International War Against Radical Islam
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