The Morning Call
9/29/15
The
Market
Technical
The indices
(DJIA 16001, S&P 1881) got hammered yesterday. The Dow ended [a] below its 100 and 200 day
moving averages, both of which represent resistance, [b] in a short term
downtrend {17139-17874}, [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 {2004-2068}, [d] challenging its intermediate term
uptrend {1920-2713} and [e] a long term uptrend {797-2145}.
While the Dow remains
above the lower boundary of its intermediate term trading range (15842), the
S&P busted through the lower boundary of its intermediate term uptrend (1920);
if remains there through the close on Thursday, the trend will re-set to a
trading range.
Just so that you
are aware the next two levels of support are the August low of 1867 and last
October’s low of 1819---which clearly the former is not that far away. A lot
of technicians are paying more attention to those August and October lows than
the lower boundary of its intermediate term uptrend as the most likely level
for a bounce. Indeed, many are hoping
that rebound off the August low will represent a double bottom and set the
Market up for a return to the highs.
Volume rose;
breadth was terrible. The VIX (27.6) was up 17%, remaining [a] above its 100
day moving average, now support, [b] within a short term uptrend and [c] within an intermediate term trading range
{it remains well above the upper boundary of its former intermediate term
downtrend} and a long term trading range.
The long
Treasury was up 2%, closing above its 100 day moving average, still support;
and within very short term, short term and intermediate term trading
ranges. The takeaway is that it remains
in a very short term trading that has existed since the August Market
lows. A pattern that is being copied by oil;
however, the dollar dropped below its 100 day moving average. If it remains there through the close on
Wednesday, it will revert to resistance.
GLD fell 1.25%,
finishing [a] below its 100 day moving average, still resistance, [b] back
below the upper boundary of its short term downtrend, voiding last Thursday’s
break to the upside, [c] within intermediate and long term downtrends and [d]
is still developing a very short term uptrend.
Have
the banksters been rigging the gold market?
Bottom line: despite
the whackage stocks experienced yesterday, that doesn’t mean that the schizophrenia
is over. Based on recent trading, we
could easily be up strong today. There
is a difference now; and that is that the Averages are near multiple support
levels. So we have some guideposts to
watch. If the indices break those
intermediate term trends, then we will likely experience the valuation mean
reversion that I have been expecting. However, it hasn’t happened yet.
Fundamental
Headlines
More
poor economic news. Yesterday, August
personal spending was in line with estimates, but personal income was
below. In addition, August pending home
sales and the Dallas Fed manufacturing index were both below forecasts. So we are off to another lousy week for data.
The
better personal spending numbers improved the Atlanta Fed’s third quarter GDP
estimate (short):
Several
anecdotal events also appear to be putting pressure on stock prices: (1)
Hillary’s assault on drug prices are not helping the biotechs, which has been
one of the strongest segments in the Market, (2) the stock of Glencore, a major
commodities trading firm, is getting bashed and the credit default spreads on
its debt is mushrooming, creating even more pressure on the commodity stocks
which are in major bear markets, (3) the news on Volkswagen, a major employer in
Germany, is not getting any better, and (4) Carl Icahn, in a major memo to the
Market, is suggesting a catastrophe is nigh.
Ichan’s
comments:
In
addition, global news didn’t help: IMF says 3.3% global growth is no longer
realistic; August Chinese industrial profits fell and its largest miner laid
off a quarter of its workforce. Finally,
pro-independence parties won a majority of seats in the Catalonian parliament
but only 48% of the vote; 50% is needed to hold a referendum.
***overnight,
in a procedural vote, passed the continuing resolution; the real vote is
tomorrow; the Indian central bank lowered key rates more than anticipated.
Bottom
line: the economic data just stays lousy
both here and abroad. The Fed and our
political class are doing nothing to help.
In addition, there has been a number of anecdotal developments that
could be suggesting that economic conditions may be worse than reflected in the
official data. All these notions are
currently making their challenge on stock prices. While my bias is that they will be
successful, that won’t make it so. But we
will know soon enough.
In the meantime,
I continue to believe that right now, short term the technicals are more
important to watch than the fundamentals.’
Some
thoughts on historic valuation (short):
Goldman
lowers 2015/2016 earnings per share and price target (medium):
Economics
This Week’s Data
The
September Dallas Fed manufacturing index came in at -9.5 versus expectations of
-9.0.
August pending home sales
fell 1.4% versus forecasts of up 0.5%.
The
August US trade deficit was $67.2 billion versus consensus of $59.1 billion.
Other
Politics
Domestic
Trump tax reform
plan (medium):
International
The
Sino-American codependency trap (medium):
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