The Morning Call
12/1/15
The
Market
Technical
The indices
(DJIA 17719, S&P 2080) once again failed to challenge the mid-November high---appearing
to have made a lower high. That said,
the downside follow through has been anemic; so it is not clear to me in which
direction the next move will be. 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, now support, [c] in a short term trading range
{2016-2104}, [d] in an intermediate term uptrend {1969-2762} [e] a long term
uptrend {800-2161}.
Volume rose; breadth
was flat. The VIX (16.3) was down 7%,
ending [a] below its 100 day moving average, now resistance, [b] in a short
term downtrend and [c] in intermediate term and long term trading ranges.
Update on margin
debt (medium):
The long
Treasury rose, breaking above its 100 day moving average; if it remains above
that MA through the close on Wednesday, it will revert from resistance to
support. It finished within very short
term, short term and intermediate term trading ranges.
Tell tail signs
the credit market is tightening (this is a bit long but a must read. It is also a great example of why I think the
bond markets are a better reflection of economic activity than the stock
market):
GLD was up but
ended [a] below its 100 day moving average, now resistance and [b] within
short, intermediate and long term downtrends.
The dollar
continues strong, finishing within a very short term uptrend.
Bottom line: the
bulls and bears have found another battleground. The bad news is that it is below a lower
high; the good news is that the trading range has been fairly tight, so there
is no discernable price breakdown.
I still think
that the strong seasonal bias favors the odds of a challenge of all-time highs,
at the least---crappy monetary, fiscal and geopolitical news
notwithstanding. That said, I remain
somewhat confused by the pin action in the overall markets: stocks flat, TLT
up, the dollar strong and gold down.
There is nothing to indicate a consistent appraisal of a tighter or
easier Fed or a tighter or easier ECB or a growing or slowing economy.
Fundamental
Headlines
The
economic datapoints are off to another inauspicious start for the week: the
November Chicago PMI was rotten, October pending home sales were very weak and
while the Dallas Fed manufacturing index was better than expected, it was still
negative. As for anecdotal evidence,
Black Friday sales were disappointing; but Cyber Monday sales were strong.
***overnight,
this is first time we have had solidly positive economic news from abroad in a
long time: November Chinese manufacturing PMI was at a three year low while the
services PMI was up slightly; November Japanese and EU Markit manufacturing PMI’s
were up; EU jobless rate was down; UK banks passed the latest bank stress test.
There
was one really good piece of news: the Fed adopted measures to curb its emergency
lending power, including the ability to offer below Market rates. This is yet another step to avoid the bail
out another ‘too big to fail’ bank and
will hopefully further improve the public’s confidence that (1) the US
financial system is increasingly sound and (2) the game isn’t rigged for the
big boys. I know that I have laid my
fair share of hot tongue on the Fed for the gross mismanagement of monetary
policy; but kudos for this move.
Bottom line: if
the economic dataflow ends this week as it has started, then it will be the fourth
down week in a row and the twelfth out of the last fourteen. Overseas, the
numbers are not much better, though yesterday’s stats were definitely upbeat. Unfortunately, they could get worse, if the
Paris bombings/immigration problem have a depressive effect on EU economic
activity. On top of that, Draghi is
promising a blockbuster QEII at the upcoming ECB meeting and Japan says it will
enact a fiscal stimulus program to go along with its QEInfinity policy---both
of which are a result of weak to no growth in their respective economies.
The longer this
goes on, the more ridiculous the Fed is going to look when it raises rates
because (it says) the economy is improving.
Of course, the Market remains at elevated levels and as long as it continues,
then the Fed will likely stay committed to the hike. I have no clue what Janet is thinking about;
but I don’t want to be heavily invested when we all find out.
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.
Valuations
as seen by the optimist (medium):
Counterpoint
(medium):
And
(medium):
Economics
This Week’s Data
The
November Chicago PMI came in at 48.7 versus expectations of 54.0.
October
pending home sales were up 0.2% versus estimates of +1.0%.
The
November Dallas Fed manufacturing index was reported at -4.9 versus forecasts
of -11.0.
Other
Cyber
Monday sales were up 12%.
Politics
Domestic
International War Against Radical
Islam
No comments:
Post a Comment