The Morning Call
11/11/15
The
Market
Technical
There was little
follow through by the indices (DJIA 17758, S&P 2081) from Monday’s big down
day. The Dow ended [a] below its 100 and
200 day moving averages, both of which represent resistance, [b] in 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 and 200 day moving averages, both of which represent
resistance, [b] in a short term trading range {2016-2104}, [d] in an
intermediate term uptrend {1952-2744} [e] a long term uptrend {800-2161}.
Volume fell
slightly; breadth improved. The VIX (15.3)
was down 7%, ending [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.
The long
Treasury was up, but still finished below its 100 day moving average for the
third day, reverting to resistance. It did
rebound off the lower boundary of its very short term trading range and remained
within short term and intermediate term trading ranges.
GLD declined
again, ending [a] right on 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: stocks
consolidated a bit yesterday. So it appears that any fear of the December
rate hike remains only surface deep.
That said, the rebound wasn’t all that impressive; so I think the Market
could still go either way short term.
Longer term, equities are caught between two forces: one of the most
powerful seasonal (up) times of the year and the discounting of a first Fed
rate hike in six years. I have no clue
which direction stocks will head; however, given current extended valuations,
even if the Averages challenge their all-time highs and the upper boundaries of
their long term uptrends, I don’t believe that they will be successful.
Fundamental
Headlines
Yesterday’s
US economic news was mixed to negative: the October small business optimism
index was below expectations, month to date retail chain store sales were down
substantially from the prior week, October import prices dropped much more than
anticipated but export prices were down slightly less than estimates and, the
good news, September wholesale inventories rose much more than forecasts while
sales were up an equal amount.
So this week has started inauspiciously for the numbers.
Not
so overseas---October Chinese CPI and PPI were somewhere between disappointing
and terrible; several members of the ECB said that there was growing consensus
to push interest rates further into negative territory (O Joyous QE); Greece
and its EU creditors are in a dispute over implementation of reforms delaying
the latest tranche of bail out funds.
***overnight,
more bad news out of China: October industrial production and urban fixed
investment were below expectations while retail sales were better; in addition,
the Financial Stability Board said that Chinese banks may need as much as $400
billion new equity in order to meet new global capital requirements; finally,
for those who continue to believe that lower oil prices are an unmitigated
positive:
More
negative anecdotal evidence---base metals now down 50% off 2011 highs (short):
And
one of the consequences of that (medium):
Bottom
line: the Fed and the odds of a December rate hike remained center stage, with
the emotional pitch much lower than on Monday.
Of particular interest was another astounding discovery by the Fed
(medium and a must read):
Notably, the
Market seems to be weighing almost every news event as to its potential impact
on the December rate. Let’s hope that
this doesn’t remain the case; otherwise the Holiday season are apt to be a bit
more volatile than most of us would like.
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.
Economics
This Week’s Data
Month
to date retail chain store sales dropped considerably from the prior week.
September
wholesale inventories rose 0.5% versus expectations of up 0.1%; sales also rose
0.5%.
Other
Questioning
the odds of a December rate hike (medium):
More
on student loans (medium):
Politics
Domestic
Rubio and the
sugar lobby (medium):
The latest on
immigration (medium):
International
Portuguese
government falls (medium):
http://www.zerohedge.com/news/2015-11-10/portuguese-government-falls-socialists-communists-topple-pm
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