The Morning Call
11/13/15
The
Market
Technical
The indices
(DJIA 17448, S&P 2045) took a body blow yesterday. The Dow ended [a] above its 100 moving
average, which represents support {I am an idiot, I have been carrying this as
resistance, when it was clearly support.
I hate getting old!}, [b] below its 200 day moving average, now support;
if it remains below this MA through the close next Tuesday, it will revert to
resistance, [c] within a short term trading range {16919-18148}, [c] in an intermediate
term trading range {15842-18295}and [d] in a long term uptrend {5471-19343}.
The S&P
finished [a] below its 100 moving average, which represents support {see
above}, [b] below its 200 day moving average, now support; if it remains below
this MA through the close next Tuesday, it will revert to resistance, [c] in a
short term trading range {2016-2104}, [d] in an intermediate term uptrend
{1955-2747} [e] a long term uptrend {800-2161}.
Volume rose;
breadth was negative. The VIX (18.3) was
up 14%, ending [a] right on its 100 day moving average, now resistance, [b]
within a short term downtrend and [c] in intermediate term and long term
trading ranges.
Update on
sentiment (short):
Also
(short):
More
on breadth (short):
The long
Treasury rose, remaining below its 100 day moving average, now resistance but
within very short term, short term and intermediate term trading ranges.
GLD rose
fractionally, ending [a] above the lower boundary of its short term trading
range, [b] below its 100 day moving average, now resistance, [c] in
intermediate and long term downtrends.
Bottom line: both
the Averages are now challenging their 200 day moving averages; but that won’t
be confirmed till next Tuesday. So right
now the key is whether there is any follow through to the downside (having made
a lower high and adding weight to the argument that the Market is topping out) or
if the pin action was just noise (and we get a rebound that could lead to a
challenge of the all-time highs and upper boundaries of the indices long term
uptrends). Stay tuned.
Fundamental
Headlines
US
economic releases yesterday were mixed to negative: weekly jobless claims were
in line, weekly mortgage applications were down but purchase applications were
up and the October budget deficit was 12% larger than last October. These are all secondary indicator so by
themselves of only minor significance.
However, they add to the negative week to date aggregate datapoints.
Perhaps
the bigger economic news was:
(1)
big declines in global material and industrial
stocks---likely reflecting the continuing poor global economic trends,
(2)
six Fed officials spoke yesterday and, overall, they
did nothing to alter the view that a December rate hike is coming---which
suggests that [a] either they aren’t paying attention to (1) above or [b] as I
have proposed, they have made their minds that they have to raise rates because
it will be easier to argue that they were too late to raise rates due to an
overabundance of caution than to have to defend themselves for having
completely missed the opportunity to normalize monetary policy.
Overseas,
Draghi continued to pound in his more QE in December theme (indicating that he
is not missing the lousy data), the Greeks were in the streets protesting EU
imposed austerity (begging the question, how can the ECB be trumpeting a new,
more aggressively easy monetary policy presumably the result of disappointing
economic numbers, while simultaneously the EU is being a hard ass on the Greeks
who are teetering on depression) and for the good news, Japanese machinery
orders were up.
Meanwhile, falling
credit demand in China is resulting in a major increase in fiscal stimulus
(medium):
***overnight,
third quarter EU GDP fell short of estimates (medium):
And China raised
margin requirements (medium):
Bottom line: the
global economic scene continues to deteriorate and is being reflected in
numerous areas---plunging commodity prices, declining industrial production and
falling Chinese credit demand. Somehow
the Fed is looking at these data as well as the sputtering US economy and
convinced itself that now is the time to raise rates.
Not that a 25
basis point increase in interest rates will make a tinker’s damn to the
economy; but it likely will to the Markets---and it is the Markets that have
been the real focus of Fed policy for lo these many years. The logical conclusion is that when the time
comes it will not raise rates. But if it
doesn’t, then (1) it will be acknowledging that all its happy horses**t about a
strengthening economy is just that and (2) if the global economy slips into
recession, which seems increasingly probable, that its policies have once again
damaged the economy [which, I am fond of reminding you, like it has in every
single transition from easy to normalized monetary policy in its history]. My opinion hasn’t changed: whenever the Fed
starts to normalize monetary policy, Market pain will be incurred; and the
longer it waits, the greater the pain.
The most
important point is that I would use the strength to take some profits in
winners and/or eliminating investments that have been a disappointment.
Six
strange things happening in the Markets.
Note the number of times the word ‘liquidity’ is used (medium and a must
read):
Investing for Survival
Risk: your best
friend and worst enemy.
News on Stocks in Our Portfolios
Economics
This Week’s Data
The
October federal budget deficit was $136.5 billion up 12% from last October.
October
PPI fell 0.4% versus expectations of a 0.2% increase; ex food and energy the
number was -0.3% versus consensus of +0.1%.
October
retail sales rose 0.1% versus estimates of up 0.3%; ex autos, they were up 0.2%
versus forecasts of up 0.4%.
Other
More
from an optimist (medium):
Politics
Domestic
Obamacare as
income redistribution (short):
Crony capitalism
at Freddie Mac (medium):
International
Now
this from Spain---the latest on Catalan secession (medium):
No comments:
Post a Comment