The Morning Call
12/14/15
The
Market
Technical
Monday Morning Chartology
The
S&P is challenging multiple support levels: (1) it is below its 200 day
moving average for the third day; if it closes below this MA today, it will
revert from support to resistance, (2) it is below its 100 day moving average;
if it trades there through the close on Tuesday, it will revert from support to
resistance, (3) below the lower boundary of its short term trading range; if it
trades there through the close on Tuesday, it will re-set to downtrend.
It is now taking
dead aim at the lower boundary of its intermediate term uptrend (1980)---which
is the first but by far the most significant support level. If the S&P breaks that level, I think
that this will be the sign that the top has been made. Speaking of which notice how the Market seems
to be rolling over, as the S&P is now in a series of lower highs. That whole ‘topping’ formation which dates
back to last December has a base at 1970---the second support level that I can
see. The next support level is the
August low (1867).
Stock
performance in December options expiration week (short):
I am not
suggesting that any of the above challenges will be successful; but I am saying
that if they are, then the Averages likely have a long way to go on the
downside.
Clearly
a good week for bonds. I believe that it
represents the rising probability of a recession and the demand for a safe
haven trade.
Does
this remind of another chart that we have been following (see below)?
Only
slightly worse than oil.
The
VIX has now risen to the point where its short term downtrend has re-set to a
trading range and its 100 day moving average has reverted to support from
resistance. Also notice that the 100 day
moving average is trending up. None of
this is a plus for stocks.
Fundamental
Last
week was a tough week for economic data: above estimates: weekly mortgage and
purchase applications and November PPI; below estimates: October consumer
credit, November small business optimism, month to date retail chains store
sales, weekly jobless claims, October wholesale and business inventories and
sales, November consumer sentiment, November US export and import prices; in
line with estimates: November retail sales and sales ex autos. That makes twelve down weeks in the last
fifteen. The only bright spot is that
November retail sales, the only primary indicator of the week, was neutral.
Overseas,
it wasn’t much better: negatives: November Chinese exports and imports, third quarter
EU GDP, October UK manufacturing, German inflation and the Bank of France
lowered its fourth quarter GDP estimate for France; positives: third quarter
Japanese GDP.
Finally,
a third high yield fund bites the dust (medium):
Goldman
tries to explain the problem (medium):
So
does Credit Suisse (short):
The
big question this week is, what does the Fed do? Most investors have been assuming a rate
hike; but most have been drinking the same ‘the economy is just great’ Kool aid
as the Fed. Crashing oil prices, chaos
in the high yield bond market and plunging stock prices may be prompting a
rethinking of that scenario---because, we know the Fed has been targeting the
Markets and not the economy. Will the
Fed to waiver? I am not sure that the
Fed hasn’t reached the point that it has no good options, only bad ones. So it
may not matter. The other question is,
do the Markets know?
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