The Morning Call
12/9/15
The
Market
Technical
The indices
(DJIA 17568, S&P 2063) had another poor day. The Dow ended [a] above its 100 moving
average, which represents support, [b] right on 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}, [d] in a long term uptrend
{5471-19343}, [e] and still within a series of lower highs.
The S&P
finished [a] above its 100 moving average, which represents support, [b] right
on its 200 day moving average, now support, [c] in a short term trading range
{2016-2104}, [d] in an intermediate term uptrend {1975-2768}, [e] a long term
uptrend {800-2161} and [f] still within a series of lower highs.
Volume rose;
breadth was negative. The VIX (17.6) was
up 10%, ending [a] below its 100 day moving average, now resistance, [b] above
the upper boundary of its short term downtrend; if it remains there through the
close on Thursday, the trend will re-set to a trading range, and [c] in intermediate
term and long term trading ranges.
The long Treasury
was up fractionally, closing above its 100 day moving average for the second
day; if it remains there through the close today, it will set as support. TLT is within very short term, short term
and intermediate term trading ranges.
Doug
Kass on MLP’s (short):
Oil fell again,
ending below the lower boundary of its short term trading range for the second
day; if it remains below this boundary through the close today, the short term
trend will re-set to a down.
GLD was up
slightly. It ended [a] below its 100 day moving average, now resistance and [b]
within short, intermediate and long term downtrends.
Bottom line: the
volatility continues and the Averages continue to develop a series of both
lower highs and higher lows, but nothing has really changed in the overall
technical picture.
Short term, traders
are telling me that the recent weakness has been influenced heavily by year-end
tax selling---and, in a year in which the Market has been flat but with big
losers (think oil), that force will be stronger than it has been in the last
three or four (up) years. Consensus
seems to be that this will continue to weigh on the Market for another week or
so. After that the much anticipated
seasonal bias should kick in. Whether
that leads to a challenge of the upper boundaries of the indices long term
uptrends remains the question.
Longer term, the
numerous divergences below the Market surface along with our assessment that
stocks are very richly valued, I believe argues against a successful challenge
and for a decline to significantly lower levels.
Fundamental
Headlines
Yesterday’s
US economic datapoints were negative: November small business optimism fell and
month to date retail chain store sales were off significantly from the prior
week. These are secondary indicators so,
by themselves, are not alarming; though clearly cumulatively they all add up
and right now point to a weakening economy.
Overseas,
after a brief respite last week, the numbers returned to their months’ long
negative trend: both Chinese November exports and imports were down; EU third
quarter GDP was up 0.3% but less than in the second quarter; October UK
manufacturing was down; and the Bank of France lowered its forecast for French
fourth quarter GDP growth. The only bright spot was Japanese third quarter GDP which
was up 1%. Not to be repetitious but
none of this is going help the growth prospects for the US.
***overnight,
China allowed the yuan to drop to a four year low.
Bottom line: the
economic numbers both here and abroad continue to suggest persistent weakness,
especially in the rest of the globe.
However, that was not the focus of Street chatter yesterday. Rather plunging oil prices has many investors
worried; in particular as I noted above, because oil is threatening to break to
new lows. And now that most realize that
lower oil prices are not good economic news, the consequences of a price of $20
a barrel---which is now the worst case Street forecast---are giving investors
the willies.
Complicating the
narrative, as I noted above, is year-end tax selling; and we know that there is
not a lot of capital gains in the stocks of the oil sector. So this selling could just be inflaming
concerns and spawning visions of doomsday for the oil industry. Ever the contrary opinionist, I think that
the lows are somewhere in the near vicinity.
As you know, our Portfolios nibbled at CVX, XOM, and XLE during the
Market sell off last August. At the
moment, I am looking for another entry point.
The most
important bit of advice I have at this point is to would use the Market strength
to take some profits in winners and/or eliminating investments that have been a
disappointment.
HSBC’s
top risks for 2016 (medium):
Investing for Survival
The
advantages of not being a pro:
News on Stocks in Our Portfolios
Economics
This Week’s Data
Month
to date retail chain store sales fell sharply from the prior week.
Weekly
mortgage applications rose 1.2%, purchase applications were up 0.04%.
Other
Fed
rate hike belies frailty in the economy (medium):
The
fallacy that devaluating your currency brings prosperity (medium):
Politics
Domestic
International War Against Radical
Islam
Saudi
Arabia underwrites terrorism (medium):
http://www.politico.com/magazine/story/2015/12/san-bernardino-isil-saudi-arabia-213421#ixzz3tk4xLndO
Iraq looking to cancel security agreement
with US (medium):
No comments:
Post a Comment