The Morning Call
10/28/15
The
Market
Technical
The indices
(DJIA 17623, S&P 2071) slipped for a second day, but little changed technically. The Dow ended [a] above its 100 moving
average, now support, [b] right on its 200 day moving averages, which now represents
resistance but is the midst of a challenge; how the Dow closes today will
determine whether or not it is successful, [c] in a short term downtrend {17036-17751},
[d] in an intermediate term trading range {15842-18295} and [e] in a long term
uptrend {5369-19241}.
The S&P
finished [a] above its 100 moving average, now support, [b] above its 200 day
moving average for the third day, which now represents resistance; if it
remains there through the close on today, it will revert to support, [c] in a
short term trading range {2016-2104}, [d] in an intermediate term uptrend {1943-2735}
[e] a long term uptrend {797-2161}, [e] above its September highs, now
representing support.
November Market
performance in pre-election years (short):
Volume was flat;
breadth was down. The VIX (15.4) was up slightly,
finishing [a] below its 100 day moving
average, now resistance, [b] within a short term downtrend and [c] in
intermediate term and long term trading ranges.
Below 13, it will again represent good portfolio insurance.
The long
Treasury was up fractionally, ending above its 100 day moving average, still
support, within very short term, short term and intermediate term trading
ranges and continues to develop a pennant formation.
GLD was up
slightly, closing [a] above its 100 day moving average, now support [b] in a
short term uptrend [c] in intermediate and long term downtrends. In my opinion, it needs to successfully
challenge the upper boundary of its intermediate term downtrend to conclusively
establish that a bottom has been made.
Oil fell 1.5%,
ending below its 100 day moving average but still within very short term and
short term trading ranges. The dollar
was up, finishing above its 100 day moving average for the third, reverting it
from resistance to support. However, it
remains within a very short term downtrend and short and intermediate term
trading ranges.
Bottom line: the
Averages spent another day consolidating.
While down, they remained within a fairly tight price range. In addition, they held recently reset
multiple resistance levels. The one bit
of cognitive dissonance is the performance of the small caps and the
transportation average which are getting whacked. Nonetheless, this pin action continues to
suggest to me that there is more upside, likely challenging their all-time
highs and upper boundaries of their long term uptrends. Although I continue to believe those
challenges will be unsuccessful.
Fundamental
Headlines
The
economic stats continued to roll over yesterday: September durable goods were
bad, so was October consumer confidence and the October Markit flash services
PMI was below expectations. On a more
positive note, month to date retail chain store rose modestly versus the prior
week and the October Richmond Fed manufacturing index better than
anticipated. The big number was the
durable goods report which is a primary indicator.
There
was also an announcement that a budget/debt ceiling deal had been tentatively
consummated. I had noted previously that
I thought that this was the high probability outcome. Nevertheless, it does remove a potential
headache for investors.
The Club for
Growth on the budget/debt ceiling deal (short):
Overseas, the dataflow
remained slow; the only stat was third quarter UK GDP growth which slowed from its
second quarter rate.
***overnight, Swedish
central bank quadrupled down on QE.
Bottom line: another
day’s data and the more it looks like last week’s upbeat stats were an
outlier. Of course, this is a busy week,
so that could change; but we now have half of all the datapoints that will
released---and the trend is not good. On
the other hand, we should expect another dose of Fed pabulum today and that
will likely inspire another investor walk through the tulips.
I would not
chase stock prices at these levels.
Indeed, I would use the strength to take some profits in winners and/or
eliminating investments that have been a disappointment.
The
problem with eternal bullishness (medium):
Have
emerging markets bottomed? (short):
Economics
This Week’s Data
Month
to date retail chain store sales were up versus the prior week.
The
August Case Shiller home price index was in line.
The
October Markit flash services PMI came in at 54.4 versus expectations of 55.3.
October
consumer confidence was reported at 97.6 versus estimates of 102.5
The
October Richmond Fed manufacturing index came in at -1 versus projections of
-2.
Weekly mortgage
applications fell 3.5% while purchase applications were down 3.0%.
The September US trade
deficit was $58.2 billion versus forecasts of $67.2 billion.
Other
The
tale of two economies: what the models say and what the data say (medium and a
must read):
The
pickle in which the global financial system finds itself (medium):
Politics
Domestic
Summers and
Mankiw on the Cadillac tax (medium):
International
China’s
reaction to US ships navigating inside the 12 mile limit (medium):
US policy in Syria---who’s on first?
(medium):
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