The Morning Call
11/20/15
The
Market
Technical
The indices
(DJIA 17733, S&P 2081) took another break yesterday, remaining unable to
develop strong follow through in either direction. The Dow ended [a] above its 100 moving
average, which represents support, [b] above its 200 day moving average, now support,
[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] above its 200 day moving average, also support,
[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
slightly; breadth was negative. The VIX
(17) was up, 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 rose, closing right on its 100 day moving average, now resistance and
within very short term, short term and intermediate term trading ranges.
GLD was up
slightly, ending [a] in a short term downtrend, [b] below its 100 day moving
average, now resistance, [c] in intermediate and long term downtrends.
The dollar sold
off, trading over its 100 day moving average and within short term and
intermediate term trading ranges, but breaking below the lower boundary of a
developing very short term uptrend.
Bottom line: the
Averages paused again yesterday, unable to follow through on Wednesday’s big
day. Given the two powerful rally days
this week, it seems like there is enough momentum to carry prices higher; and
indeed, the Averages did manage to bust through very short term downtrends. On the other hand, absent upside follow
through today, they will have made another lower high on Wednesday. Further, on the tenuous assumption that investors
believe that the economy is strong enough to handle a rate hike, bonds and the
dollar again were unsupportive.
I keep falling
back on seasonal factors as the primary source of the recent buying enthusiasm;
and I see no reason to change that view.
So a challenge of the indices’ all-time highs and the upper boundaries
of their long term uptrends still seems the most likely course; although I also
believe that the schizophrenic behavior of the Averages supports my contention
that any challenges will be failures.
All that said, I
remain somewhat perplexed by the recent pin action.
December
seasonal bias (short):
Fundamental
Headlines
Yesterday’s
US economic data was upbeat for a change: weekly jobless claims were a bit
disappointing but the Philly Fed index as well as the leading economic indicators
were both better than anticipated.
However, with only one secondary indicator out to today, this week
returns to the negative column.
Overseas,
both Japanese October imports and exports fell noticeably and the Baltic Dry Index
hit an all-time low. So at the risk of
insulting the Fed one too many times, these are just another set of data
released by all our major trading partners over last month that presents not
one iota of confirmation that the global economy is ‘improving’.
***overnight,
Draghi quintupled down on his recent campaign to insure that the world clearly
understands that more EU QE is coming.
In addition, the Greek parliament
passed reform measures demanded by EU lenders as a condition to receive
additional bail out funds.
Speaking
of the Fed, and I wish that I wasn’t, it held center stage yesterday as two
FOMC members were out talking up the odds of a December rate hike. I have little to add to the heap of hot
tongue I have already laid on these folks.
But here are some other opinions:
The
Fed’s policy mistake (medium):
A
look at the history of Fed induced volatility (short):
David Stockman
goes another round with the Fed (medium and a must read):
Counterpoint: ever
the optimist (medium):
Bottom line: yesterday’s was a welcome respite in an
otherwise disappointing week of US data; unfortunately, this week’s dataflow is
largely complete and it is downbeat.
Ditto the overseas stats except that they are in a virtually
uninterrupted string of lousy stats.
The Fed seems to
have gone through the looking glass and somehow believes that the persistent barrage
of disappointing economic data is positive.
Or more properly said, it ‘says’ that these numbers are upbeat. But we
know that it is the Market that is positive and as long as it stays that way,
the Fed will likely hike rates in December.
Not that a 25
basis point rise in rates will make a difference to the economy. It won’t; although admittedly, it will
increase upward pressure on the dollar which will make life more difficult for
the US multinationals.
The impact will,
in my opinion, be felt by the Market. To
be sure, this week’s pin action is not very supportive of that position. But I am sticking with it.
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
The
October leading economic indicators were up 0.6% versus consensus of up 0.5%.
Other
The
Baltic Dry Index is at all-time lows (short):
China
continues its campaign of intimidation against financial institutions (medium):
Politics
Domestic
Can this be
true? (short):
Largest health
care insurer may exit Obamacare (medium):
Clinton
Foundation running a $20 million hedge fund in Colombia (medium):
House approves
tougher refugee screening bill (medium):
International War Against Radical
Islam
Barbarians
at the gate (medium and a must read):
The most important question about
ISIS (medium):
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