The Morning Call
11/3/15
The
Market
Technical
The indices
(DJIA 17828, S&P 2104) spiked again yesterday. The Dow ended [a] above its 100 moving
average, now support, [b] above its 200 day moving average, now support, [c]
above the upper boundary of its short term downtrend {17021-17734}; if it
remains there through the close on Wednesday, it will re-set to a trading range,
[d] in an intermediate term trading range {15842-18295} and [e] in a long term
uptrend {5471-19343}.
The S&P
finished [a] above its 100 moving average, now support, [b] above its 200 day
moving average, now support, [c] right on the upper boundary of its short term
trading range {2016-2104}, [d] in an intermediate term uptrend {1948-2940} [e]
a long term uptrend {800-2161}, [f] above its September highs, now representing
support.
Volume declined;
breadth was up. The VIX (14.1) fell 6%, 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 down 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 down, closing
[a] below its 100 day moving average, now support; but if it ends below that MA
through Wednesday, it will revert to resistance, [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---and clearly the reverse
is occurring.
Bottom line: the
Averages continued to press to the upside, with seasonal factors providing a
tailwind. The odds of challenging their
all-time highs and the upper boundaries of their long term uptrend continue to
improve. Although I still believe that those
challenges, especially to the upper boundaries of the long term uptrends, will
be unsuccessful.
Fundamental
Headlines
The
US stats were slightly positive yesterday: the October manufacturing PMI was in
line, the October ISM manufacturing index was 0.1 ahead of estimates while
September construction spending beat expectations nicely. We needed some good news after a disastrous
set of numbers last week.
Overseas,
the data was mixed: the October Chinese manufacturing index was down, the EU
number up slightly while the UK index was up more than consensus; the ECB stated
that Greece banks need to raise $15.9 billion in new capital to offset prior
losses.
Bottom line: everything continues to come up roses for the
Market despite the fact that (1) economic data has been disappointing in nine
of the last ten weeks and yesterday’s release of the Atlanta Fed’s downgrade of
its fourth quarter GDP growth estimate and (2) a mediocre [to date] third
quarter earnings season. In my opinion,
the only reasonable explanation for that is more competitive QE from global
central bankers.
Which makes the
media’s yakking about the increasing odds of a December Fed rate hike a bit
mystifying because it assumes (1) a dramatic improvement in the economy---belied
by the Atlanta Fed forecast or (2) that the Fed has suddenly changed its easy
money stripes---believe that at your own risk.
I have no idea what these guys are thinking about.
I believe that
anyone buying stocks at current valuations on more monetary easing is assuming
an unnecessary and unacceptable level of risk.
Hence, 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 Atlanta Fed’s
fourth quarter GDP estimate (short but not sweet):
The
earnings enigma (short):
Six
reasons to be bullish---or not (medium):
Update
on valuation (medium):
Economics
This Week’s Data
The
October PMI manufacturing index was flat with September at 54.1.
The
October ISM manufacturing index came in at 50.1 versus expectations of 50.0.
September
construction spending rose 0.6% versus estimates of up 0.4%.
Other
For
the bulls (short):
How
close are we to the next financial crisis? (medium):
China’s
hidden nonperforming loan bomb (medium):
Politics
Domestic
Obamacare fraud,
etc. (a bit long but a must read):
A thought on our university system (short):
Quote of the day
(short):
International War Against Radical
Islam
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