The Morning Call
12/24/15
The
Market
Technical
The
S&P has negated the challenges to its short term trading range and its 100
day moving average this week. Notice
that once again the 100 day moving average has become firm support; but also
note that it is trending down. In other
words, the support is weakening. Also
note that while the S&P could break through a very, very short term downtrend,
it is nowhere near breaking the trend of lower highs. To get to the upper boundary of its long term
uptrend, the S&P will have to take out that very, very short term downtrend,
break above the last lower high, and break above the all-time high. That is a lot of work, even for Santa’s
rally. Meanwhile, breadth is nothing to
write home about and volume is declining.
The
VIX is challenging a very short term uptrend.
If successful, it will point to higher stock prices near term. However, it is also getting close to the
12-13 price level which I continue to believe is very cheap portfolio
insurance.
Fundamental
The
economic data this week was balanced, though the primary indicators were
negative: durable goods orders (+), personal income (+), personal spending (0),
third quarter GDP (0), new home sales (-), existing home sales (-), third
quarter corporate profits (-), durable goods orders, ex transportation
(-). There were few numbers from
overseas, most notable being lousy UK third quarter GDP, the continued depreciation
of the yuan and a renewed effort by the Bank of China to pump up the level of
QE.
In short, no let
up the economic deterioration both here (now fourteen out of the last seventeen
weeks) and abroad (still batting 100%). So no change in our forecast. Indeed, the risk of recession continues to
rise. And no change in the gross
overvaluation of stocks.
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