The Morning Call
9/25/15
The
Market
Technical
The indices
(DJIA 16201, S&P 1932) were off again yesterday; but intraday they sold off
hard and then recovered much of the decline by the close. 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 {2006-2070}, [d] within an intermediate term uptrend
{1918-2111} and [e] a long term uptrend {797-2145}.
Intraday, it
traded below the lower boundary of its intermediate term uptrend but couldn’t
remain there. This is the second
unsuccessful challenge of this support level, lending credence to its strength.
Volume rose;
breadth was negative. The VIX (23.5) bounced 6%, remaining [a] above its 100
day moving average, now support, [b] back above the lower boundary of its a
short term uptrend {completing its second round trip}, voiding Wednesday’s
break, [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.
The long
Treasury rose, closing above its 100 day moving average, still support; and it ended
within short and intermediate term trading ranges.
GLD jumped 2%, finishing
[a] above its 100 day moving average; if it remains there through the close on
Tuesday, it will revert to support, [b] above the upper boundary of its short
term downtrend; if it remains there through the close on Monday, it will re-set
to a short term trading range, [c] within intermediate and long term downtrends
and [d] is now developing a very short term uptrend. I have no idea whether this is a sign that a
bottom has been made or another false flag.
As usual, it all depends on follow through.
Oil rose, but stayed
below its 100 day moving average and within a short term trading range and
intermediate and long term downtrends.
The dollar fell,
but closed below 100 day moving average, which is now resistance, and within
short and intermediate term trading ranges.
Bottom line: yesterday
the S&P challenged and failed to break the lower boundary of its intermediate
term uptrend. Despite closing in the
red, this failure suggests some follow through to the upside short term. On the other hand, the better close to the
VIX suggests more downside. In sum, the
schizophrenia continues. For the short
term, I am focused on the strength of any additional upside momentum; but that
in no way should be interpreted as an upbeat assessment of the Market.
More
signs that the bear market has begun (medium):
Another
bear market forecast (short):
Counterpoint
(medium):
Octoberphobia
(short)):
Fundamental
Headlines
Yesterday’s
US economic news was mixed (for a change): weekly jobless claims were up less
than expected, August new home sales were strong, the August Kansas City Fed
manufacturing index fell but slightly less than in July, August durable goods orders
were in line but ex transportation, they were weak and the August Chicago Fed
national activity index fell versus a rise in July. Two primary indicators: new home sales (+)
and the durable goods orders ex transportation (-). Mixed is better than lousy; but the overall
tone this week’s stats as of the close last night was negative.
Overseas,
central banks were making the headlines: Draghi downplayed need for further
monetary stimulus while the central banks of Norway and Taiwan cut key interest
rates. In addition, rumors suggested that
the VW emissions fraud problem could spread to BMW. No help.
***overnight,
French joblessness ranks at all-time high; August Japanese core CPI was down
0.1%.
The
pope continued to steal the headlines but Yellen made a late day speech in
which, she struck a more hawkish tone---this after two weeks of poor data both
here and abroad. Why? My guess is that she is once again responding
to the Markets rather than to the data; that is, stocks have been lower since
the September FOMC meeting in which it didn’t raise rates, so she gave the
Market what she thought it wanted. And
sure enough, stocks bounced hard in the midst of a big down day. Good job.
In
the absence of other news and in frustration over the really lousy job this Fed
has done, I have linked below to a number of very good articles discussing Fed
policy, its mistakes, the problems those mistakes have caused us, the lack of a
decent exit strategy and the implications for the Market. If you have time, they are all worth the read.
Yellen’s
bubble (medium and a must read):
Another
must read summary of inept Fed monetary policy (medium):
Is Yellen losing
control (short)?
The latest from
Bill Gross (medium):
The central banks’
bubble’ machine (medium):
The QEInfinity
paradox (short):
Bottom
line: the economic data continues to suggest
that our forecast is rapidly becoming a ‘best case’ scenario. Of course, if the trend remains unchanged,
that won’t last for long. Further, the Fed insists on destroying what little
credibility it has left by voicing its wishy washy ‘data dependent’ bullshit to
cover up its own confusion and ineptness and conceal its sole goal of keeping
the Market happy. As that credibility dissipates
and investors challenge their assumptions about the Fed’s infallibility,
valuation measures are also apt to be challenged. Given their current lofty heights, that is
not likely to be a pleasant experience.
In the meantime,
I continue to believe that right now, short term the technicals are more
important to watch than the fundamentals.’
More on
corporate profit growth (medium):
Economics
This Week’s Data
August
new home sales were up 5.7% versus estimates of a 1.5% increase.
The
September Kansas City Fed manufacturing index came in at -8 versus
August’s reading of -9.
The August
Chicago Fed national activity index fell.
Revised
second quarter GDP was reported at up 3.9% versus the prior reading of up 3.7%;
corporate profits came in up 6.3% versus the prior report of up 7.3%.
Other
Update
on Greece (medium):
Politics
Domestic
A different take
on Fiorina’s track record at HP (medium):
Are drug prices
too high (short):
International War Against Radical
Islam
China
to provide military assistance to Syria? (medium):
Obama’s ISIS czar steps down
(short):
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