The Morning Call
10/13/15
The
Market
Technical
The indices
(DJIA 17131, S&P 2017) continued to hang on to their gains. The Dow ended [a] below its 100 and 200 day
moving averages, both of which represent resistance, [b] in a short term
downtrend {17099-17808}, [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 {1990-2051}, [d] in an intermediate term uptrend {1933-2726}
[e] a long term uptrend {797-2145}.
Volume declined
(which it has every day of this rally expect for one); breadth was mixed,
though the flow of funds indicator remains very strong. The VIX (16.1) was off
5% finishing [a] below its 100 day moving average for the third day, re-setting
to resistance, [b] within a short term downtrend and [c] in intermediate term
and long term trading ranges.
The long
Treasury was up, ending above its 100 day moving average, still support; and
within very short term, short term and intermediate term trading ranges.
GLD was up, closing
[a] above its 100 day moving average for the second day; if it finishes there
today, it will revert from resistance to support [b] in a short term trading
range, [c] within intermediate and long
term downtrends and [d] is still developing a very short term uptrend.
After rallying
last week, oil was down 5% on news that a number of smaller oil companies had
hedged their production through 2016 at the recent price highs, providing
enough liquidity to allow them to continue to pump oil at relatively high
levels.
Bottom line:
stocks put in another up day despite the lack of volume and their overbought
position. I know that I sound like a
broken record, but stocks really are in an extraordinarily precarious short
term technical position. I am not trying
to argue that stocks are about to tank.
Indeed, there has been enough improvement in some of the breadth
indicators that stocks could trade sideways or even challenge their former
highs in the seasonally upbeat November/December period. But that is not saying much with the Averages
roughly 5% off those highs.
Chasing stocks
at current levels is, I believe, a losing game.
I continue to love the cash in our Portfolios.
Fundamental
Headlines
There
were few news points of any significance yesterday. No economic news either here or abroad. No political news except for the slowly
increasing escalation of the cat and mouse game being played out in Syria. Of course, that ought to be enough to keep
all our sphincters tightened up. But in
the current spirit of bad news is good news, I guess nuclear war in the Middle
East would mean a gap open to the upside.
***overnight,
September Chinese imports fell 20.4% while exports dropped 3.7%; the Russian
finance minister said that his country’s 2015 GDP will likely fall 3.8%;
September UK inflation declined 0.1%; October German economic morale was down.
Bottom line: yet
another quiet day allowing stocks to drift higher. That might not last too long since earnings
season has started. Early tabulations
suggest disappointing results; but as I noted above, bad news could have a
leavening effect.
I mentioned
yesterday that I will be lowering our economic forecast (again) this week. I should have the work done by Friday.
In sum, stocks
are rising in the face of a flat/slight increase to down economy, a likely lower third quarter corporate profits
shortfall and a stick of dynamite (Syria) in search of a match. Whatever is motivating investors, it’s doing
nothing for me.
China’s
bond bubble (short):
Economics
This Week’s Data
The
September small business optimism index came in at 96.1 versus expectations of
95.8.
Other
The
Fed and the dollar (medium):
The
Fed and the emerging markets (medium and a must read):
What
the Fed has wrought (medium):
Baltic
Dry Index falling again (short):
Hidden
EM debts could be a problem (medium):
Politics
Domestic
International War Against Radical
Islam
Arrogance
and hubris in the State Department (medium):
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