The Morning Call
11/18/15
The
Market
Technical
The indices
(DJIA 17489, S&P 2050) see sawed most of yesterday, then closed mixed (Dow
up, S&P down). The Dow ended [a]
above its 100 moving average, which represents support, [b] below its 200 day
moving average for the fourth day, thereby reverting 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] above its 100 moving average which represents support, [b] below
its 200 day moving average for the fourth day, thereby reverting to resistance,
[c] in a short term trading range {2016-2104}, [d] in an intermediate term
uptrend {1961-2754} [e] a long term uptrend {800-2161}.
Volume rose;
breadth was mixed. The VIX (18.8) was up
4%, ending [a] back above its 100 day moving average {now resistance}; if it
remains there through the close on Thursday, it will revert to support, [b] back
above the upper boundary of its a short term downtrend; if it remains there
through the close on Thursday, it will re-set to a trading range and [c] in
intermediate term and long term trading ranges.
The long
Treasury rose, closing below its 100 day moving average, now resistance but
within very short term, short term and intermediate term trading ranges.
GLD was down,
ending [a] below the lower boundary of its short term trading range for a third
day; thereby resetting to a downtrend, [b] below its 100 day moving average,
now resistance, [c] in intermediate and long term downtrends.
Bottom line: the
Averages again couldn’t manage upside follow through to Monday’s pop; that
keeps intact a very short term downtrend off the recent November 3rd
high. Not that this trend is worth
betting money on; but it is holding in the face of a strong seasonal bias to
the upside. However, given this bias, I still
think it likely that the prior highs and upper boundaries of the indices long
term uptrends will get challenged before New Year’s---although as you know, I believe
that those will be unsuccessful. I
remain somewhat perplexed by the recent pin action and continue to look for
strong follow through in either direction.
Fundamental
Headlines
Yesterday’s US
economic stats showed little improvement: month to date retail chain store
sales were actually up a tad from the prior week, but October industrial production
was down versus forecasts of being up and the November housing index was lower
than anticipated.
Overseas,
October UK inflation was negative and its factory output down. However, the headlines were full of rumors of
bomb attack in Germany (later reported as unfounded); although they didn’t have
quite the upbeat impact as the actual Paris tragedy. You know that you are in a schizophrenic
market when 129 dead spawns a 200 point rally but a rumored bombing attempt
leaves the Averages flat on the day.
Bottom line: this
week’s economic data are off to a very inauspicious start although there
remains some very important numbers yet to come. Meanwhile, overseas, the steady drumbeat of
poor stats has been relentless. At some
point in time, it seems inevitable that this will start to show up domestically. Indeed, maybe it already has and those two
upbeat weeks in recent US data were just outliers.
With respect to
what is going on in Europe, I don’t care what stocks did on Monday, it is tough
for me to believe that an intensification of the global war against radical
islam is good for either stocks or the economy, irrespective of what the Fed
does---the key being whether the latest attacks presage more of the same or
they are just a one-time shot.
For the moment, I
am hoping that the US economy is stabilizing---though hope is the operative
word. Unfortunately, it must contend
with a weakening global economy, perhaps one in which national security is a
growing problem. However much faith I may
have in US industry and labor’s ability to deal with adverse events, it may be
too much to ask them to carry the bulk of the rest of the world’s economies. Finally,
Fed policy remains a headwind to growth.
I continue to believe that 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.
Economic
impact of the Paris attack (medium):
Policy
makers fiddle while the global economy burns (medium):
The
fall 2015 earnings expectations for 2016 (short):
No
earnings growth without buybacks (short):
The
famous final scene (medium):
The
latest from Bank of America (short):
Subscriber Alert
Yesterday,
Airgas (ARG--$137) received a buyout offer from Air Liquide and the stock rose
significantly. ARG is on the Dividend
Growth Buy List, though no stock has been purchased. Given the large up move, it is being Removed
from the Dividend Growth Buy List.
Investing for Survival
What
isn’t possible (short)?
News on Stocks in Our Portfolios
Revenue of $21.82B
(+6.3% Y/Y) beats by $60M.
Economics
This Week’s Data
Month
to date retail chain store sales were up slightly versus the prior week.
October
industrial production fell 0.2% versus expectations of a rise of 0.1%; capacity
utilization came in at 77.5, in line.
The
November National Association of Homebuilders index was reported at 62.0 versus
estimates of 64.0.
Weekly
mortgage applications rose 6.2% while purchase applications were up 12.0%.
October
housing starts fell 11% versus forecasts of down 4%.
Other
Politics
Domestic
International War Against Radical
Islam
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