The Morning Call
10/1/15
My daughter and her family move
this weekend; and I will be helping. No
Morning Call tomorrow or Closing Bell on Saturday.
The
Market
Technical
Yesterday, the
indices (DJIA 16284, S&P 1920) gave us the bounce off an oversold condition
that I had expected on Tuesday. However,
there was little change in the technical condition of the Market. The Dow ended [a] below its 100 and 200 day
moving averages, both of which represent resistance, [b] in a short term
downtrend {17131-17866}, [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 {2001-2065}, [d] challenging its intermediate term
uptrend {1923-2716}; it closed below the lower boundary of its intermediate
term uptrend (1923) for a third day. If
remains there through the close today, the trend will re-set to a trading
range. Were that to occur, the next two
levels of support are the August low of 1867 and last October’s low of 1819 and
[e] a long term uptrend {797-2145}.
Volume rose;
breadth improved. The VIX (24.5) was off 8%, remaining [a] above its 100 day
moving average, now support, [b] back below the lower boundary of its short
term uptrend; if it trades there through the close on Friday, the trend will
re-set to a trading range 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 down slightly but was well within a defined strong two week
rebound. It finished above its 100 day
moving average, still support; and within short term and intermediate term
trading ranges.
The dollar closed
right on its 100 day moving average after two days below. Strictly following the rules of our Time and
Distance Discipline, I wait for the next day’s pin action to determine if it
reverts to resistance (if it is off today) or void the break (if it is up
today).
GLD fell again,
finishing [a] below its 100 day moving average, still resistance, [b] within short,
intermediate and long term downtrends and [d] is threatening to break the still
developing very short term uptrend.
Bottom line: stocks
bounced hard, which I had expected on Tuesday.
However, the S&P couldn’t get back above the lower boundary of its
intermediate uptrend. That sets today up
as technically important: if the S&P can close above that boundary that
would reconfirm its strength and likely point to higher prices; if it fails,
then the S&P joins the Dow in an intermediate trading range and lowers the
downside objective for this index. I continue to watch.
Stock
performance in fourth quarter after down third quarter (short):
Fundamental
Headlines
Yesterday’s
US economic data had a bright spot---a better September ADP private payroll
report; overall, not so hot---weekly mortgage and purchase applications fell
and the September Chicago PMI was well short of expectations. No break in a lousy trend.
Overseas,
it wasn’t much better: September EU CPI fell below 0 and its unemployment was
unchanged; August German retail sales dropped; and amazingly, Abe is suggesting
yet another round of QE.
***overnight,
September manufacturing data from Japan, China and the EU were all disappointing;
plus capital continues to flee the yuan.
Bottom line: the
political class saved investors from having to worry about a government
shutdown. Score one for the good
guys. Unfortunately, the economic data remains
crappy both here and abroad. Unless
that changes, economic and valuation forecasts on the Street are likely to move
lower irrespective of whether the Indian or Japanese central banks double (or
in Japan’s case, quintuple) down on QE or whether or not the Fed raises the Fed
Funds rate by 25 basis points.
Of course, ‘unless’
is the operative word above. To be sure,
change could occur and, meanwhile, investors could continue to ignore the
numbers and keep stocks rising on the hopes of better numbers. And that might happen. That said, hope is not a strategy.
In the meantime,
I continue to believe that right now, short term the technicals are more
important to watch than the fundamentals.’
For
the bulls (medium):
For
the not so bullish (medium):
And:
Plus,
Mae West on Fed policy (medium):
Investing for Survival
Lessons
from the bull market (medium):
Company Highlight
AmeriGas
Partners LP is a retail and wholesale distributor of propane gas in the
US. It serves two million residential,
commercial, industrial, agricultural and motor fuel customers in 50
states. It also sells, installs and
services propane appliances and heating systems. APU has grown profits and
dividends at a 5% annual rate for the past 5 years earning a 15-20% return on
equity. When coupled with the stock’s
7.5% yield, APU is an attractive investment and should continue to be as a
result of:
(1) an increase in customers converting form
other fuels to natural gas,
(2) focus on higher profit investments and lower
costs.
Negatives:
(1) pricing turmoil in
the energy sector.
AmeriGas is
rated B++ by Value Line, has a 62% debt to equity ratio and its stock yields
approximately 7.5%.
Statistical Summary
Stock Dividend Payout # Increases
Yield Growth Rate Ratio
Since 2005
APU 7.5 5% 70%* 10
Ind Ave 3.2 4 57 NA
Debt/ EPS Down Net Value Line
Equity ROE Since 2005 Margin Rating
APU 62 20%
3 7% B++
Ind Ave 44 11 NA 7 NA
*payout
as a percent of cash flow
Chart
Note: APU stock made good progress off its September
2008 low, surpassing the downtrend off its May 2007 high (straight red line)
and the November 2008 trading high (green line). Long term, the stock is in a trading range
(blue lines). Intermediate term, it is
in a downtrend (purple lines). The
wiggly red line is the 100 day moving average.
The High Yield Portfolio owns a full position in APU. The stock is on the High Yield Buy List, even
though it is below the lower boundary of its Buy Value Range. As I noted earlier, with the Market in a
correction, I leave stocks on the Buy List unless they trade below their Sell
Half Price; the lower boundary of its Sell Half Range is $71.
10/15
News on Stocks in Our Portfolios
Paychex: FQ1
EPS of $0.58 beats by $0.07.
Revenue of $723M
(+8.4% Y/Y) beats by $5.45M.
Economics
This Week’s Data
Weekly
jobless claims rose 10,000 versus expectations of up 5,000.
Other
Politics
Domestic
International War Against Radical
Islam
Global
reaction to Russia’s air strikes in Syria (medium):
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