The Morning Call
10/6/15
The
Market
Technical
The indices
(DJIA 16776, S&P 1987) turned in second blockbuster day in a row. Still,
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 {17127-17843}, [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 {1996-2057}, [d] in an intermediate term uptrend {1927-2720}
[e] a long term uptrend {797-2145}. It
did finish above 1970 which has been resistance; if it remains above that level
through the close Wednesday, it will revert to support.
Volume declined;
breadth improved. The VIX (19.5) was off another 6.5%, remaining [a] above its
100 day moving average, now support, [b] in short term, intermediate term and
long term trading ranges. Clearly, it is
below the 20 price level; further weakness would be a plus for stocks.
The long
Treasury was down 1.4% but drifted out of the well-defined strong two week
rebound. It finished above its 100 day
moving average, still support; and within short term and intermediate term
trading ranges.
GLD fell again,
finishing [a] below its 100 day moving average, still resistance, [b] within short,
intermediate and long term downtrends but [d] is still developing very short
term uptrend.
Bottom line: stocks
continued their Titan III formation (1) confirming [a] an unsuccessful
challenge of the S&P’s intermediate term uptrend and [b] and a retest of
the August lows and (2) now challenging the S&P 1970 resistance level. If that is successful, I can’t rule out a
test of the highs. Two things to note
(1) stocks are extremely overbought so some backing and filling should be
expected at the least and (2) yesterday’s surge was on lower volume which tends
not to be a good sign for a continuing recovery in prices.
Biggest
short squeeze in four years (medium):
Those
who sold in May and went away are now looking to get back in (medium):
More
(medium)
Thoughts
for those getting jiggy about Friday’s intraday reversal (short):
Fundamental
Headlines
Numbers
didn’t get any better. Yesterday, the
September Gallup consumer spending index was lower than its August reading, September
Markit PMI services index and ISM nonmanufacturing index were both below
estimates.
Overseas, the EU
services PMI, EU composite PMI and EU consumer confidence came in below
expectations; the World Bank reduced its growth forecast for China; Saudi cut
oil prices.
***overnight,
an agreement was reached on the Trans Pacific Partnership; August German
factory orders fell 1.8% versus expectations of up 0.5%.
Does
anyone see good news there? OK, if you
are still a believer the QE. Or if you
are still a believer that lower oil prices are an unmitigated positive. I am neither.
Indeed, I think that one day all the optimists are going to wake up to a
recession and realize that QE is a fraud.
A growing risk
of recession (medium):
And
globally as well (medium):
A
slightly more sanguine view (short):
http://www.capitalspectator.com/more-signs-of-slower-us-growth-in-todays-economic-updates/#more-6268
The
Fed still hasn’t caught up to reality (medium):
The
Fed is powerless to boost jobs (medium):
David
Stockman on the Fed (medium):
The
precarious position of global central banks (medium):
Bottom line: the
economic data remains terrible both here and abroad. Unless that changes, economic and valuation
forecasts on the Street are likely to move lower irrespective of whether there
is more QE. Indeed, if the stats do
continue to weaken and we do get more QE, we are all the closer to a Fed
confidence implosion.
In the meantime,
I continue to believe that right now, short term the technicals are more
important to watch than the fundamentals.’
Economics
This Week’s Data
The
September Markit PMI services index was reported at 55.1 versus estimates of
55.8.
The
September ISM nonmanufacturing index came in at 56.9 versus forecasts of 58.0.
The
August US trade balance was -$48.3 billion versus expectations of -$48.6
billion.
Other
Labor
Market Conditions Index:
Politics
Domestic
Quote of the day
(short):
International War Against Radical
Islam
Syrian
war about to expand?
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