The Morning Call
10/7/15
The
Market
Technical
The indices
(DJIA 16790, S&P 1797) closed mixed yesterday (Dow up, S&P down),
though the DJIA was heavily influenced by the positive performance by DuPont. The Dow ended [a] below its 100 and 200 day
moving averages, both of which represent resistance, [b] in a short term
downtrend {17107-17823}, [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 finished
above 1970 (now resistance) for the second day; if it remains above that level
through the close today, it will revert to support.
Volume declined;
breadth was mixed, with the flow of funds indicator breaking a downtrend. The
VIX (19.4) was off fractionally 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.
NYSE short interest near
record high (short):
Stock
Traders’ Almanac issues its seasonal MACD buy signal (short):
The long
Treasury was up but remained 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 rose,
finishing [a] above its 100 day moving average {resistance} and the upper boundary
of its short term downtrend; if it closes above these boundaries through Thursday,
the 100 day moving average will revert to support and the short term trend will
re-set to a trading range, [b] within short, intermediate and long term
downtrends but [c] is still developing a very short term uptrend.
Oil has been
strong of late and appears to be mounting an assault on the upper boundary of
its short term trading range.
Bottom line: stocks
took a breather yesterday, with the S&P remaining above 1970 resistance
level. If that is successful, I can’t
rule out a test of the highs. Several things
to note (1) stocks remain extremely overbought so more backing and filling
should be expected at the least, (2) with the Chinese markets closed, I am not
sure how accurate the technical picture is and (3) volume was low again and
that tends not to be a good sign for a continuing recovery in prices.
Fundamental
Headlines
Not
much in terms of meaningful US data was reported yesterday: the August US trade
deficit came in pretty much as expected while month to date retail chain store
sales fell on a week over week basis.
However,
overseas, August German factory orders fell versus expectations of being up. In addition, the IMF lowered global growth
estimates, again (medium):
On
an anecdotal basis, YUM Brands reported earnings after the close yesterday
which were extremely disappointing. This
company gets almost half of its profits from China; so this is not a great
narrative on the Chinese economy.
Bottom line: yesterday
was relatively quiet in terms of news flow.
The most significant points were from overseas---German factory orders
and YUM’s earnings; neither of which makes me feel all warm and fuzzy. So my conclusion hasn’t changed: ‘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.’
Third
quarter earnings preview (medium):
Has
the energy sector bottomed (short)?
SocGen
on what will drive the Market in the fourth quarter (medium):
Economics
This Week’s Data
Month
to date retail chain store sales fell from last week’s reading.
Weekly
mortgage applications were reported up 25.5% and purchase applications 27.0%. However, these numbers were heavily impacted
by a change in the way this data is recorded.
Other
A
different perspective on the Market’s reaction to last Friday’s nonfarm payroll
report (medium):
Bernanke’s
cockroaches (medium and today’s must read):
Politics
Domestic
International War Against Radical
Islam
The
latest from Syria (medium):
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