The Morning Call
12/2/15
The
Market
Technical
The indices
(DJIA 17888, S&P 2103) popped yesterday and look to be headed higher. 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}, [d] in a long term uptrend
{5471-19343}, [e] but remained below the prior lower high.
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}, [f] and above its prior lower high.
The recent
history of the Santa Claus rally (short):
Volume fell;
breadth improved. The VIX (14.7) was
down 9%, 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.
The long
Treasury was strong again, finishing above its 100 day moving average for a
second day; if it remains above that MA through the close today, it will revert
from resistance to support. It finished
within very short term, short term and intermediate term trading ranges.
GLD was up again
but ended [a] below its 100 day moving average, now resistance and [b] within
short, intermediate and long term downtrends.
Bottom line: the
S&P pushed above the recent lower high and is now one point away from the
upper boundary of its short term trading range.
That pin action is indicative of regained momentum to the upside. The Dow’s performance was not nearly as
positive. So it is not crystal clear
that the indices are going to challenge their all-time highs in the immediate
future. Although I still think that the
strong seasonal bias favors one before New Year’s.
Fundamental
Headlines
Yesterday
witnessed a number of upbeat US economic stats: month to date retail chain
store sales were up considerably versus the prior week, the November Markit
manufacturing PMI came in slightly above expectations , as did November light
vehicle sales and October construction spending rose more than anticipated. The bad news was that the November ISM
manufacturing index was well below estimates; and in anecdotal news, the
Atlanta Fed slashes its fourth quarter GDP growth forecast.
***overnight,
Senate and House conferees reached an agreement on a $305 billion highway bill
which they say will require no debt financing---I don’t have to tell what the
operative words are. And Puerto Rico
made a $345 million debt payment that many believed it would default on.
Overseas,
there was also positive economic news---the first 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; the EU
jobless rate was down and UK banks passed the latest bank stress test.
***overnight,
Chinese stocks are soaring on expectations of additional Bank of China
stimulus; November EU inflation was lower than anticipated which will help the
ECB’s case for more QE which is expected in the meeting tomorrow.
Bottom line: yesterday’s
economic data was as good, if not better, than Monday’s was bad. So this could be a set up for another mixed
to up week. We’ll see.
Overseas, we
could be setting up for the first upbeat week of stats for months. Of course, one week does not a trend
make. Further, the ruling classes of Europe
and Japan would not be planning on introducing stimulative monetary/fiscal
policies if they thought economic conditions were improving. Again, follow through is the key.
However, the
news was not so good out from Brazil (medium):
Meanwhile,
stocks continue to rise no matter if the data is positive (supporting a Fed
rate hike) or negative (not). I continue
to believe that it is the Market on which the Fed is focused. So the more it smokes to the upside, the more
probable a December rate hike. But the
Fed’s risk, as I suggested yesterday, is that it does raise rates and the
economy rolls over---which the last thirteen weeks of data suggest is a reasonable
probability. If that happens, it can
kiss investor confidence good bye.
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.
Updates
on valuation:
Economics
This Week’s Data
Month
to date retail chain store sales were up considerably versus the prior week.
The
November Markit manufacturing PMI came in at 52.8 versus expectations of 52.6.
The
November ISM manufacturing index was reported at 48.6 versus estimates of 50.5.
October
construction spending rose 1.0% versus forecasts of +0.6%
November light vehicle
sales were 18.2 million versus projections of 18.1 million.
Weekly mortgage
applications fell 0.2% but purchase applications rose 8.0%.
The
November ADP private payroll report recorded the gain of 21,000 jobs versus an
anticipated increase of 1,000.
Third
quarter nonfarm productivity rose 2.2%, in line; unit labor costs were up 1.8%
versus expectations of +0.9%.
Other
The
Atlanta Fed slashes its fourth quarter GDP forecast (short):
Charts
on business investments and consumer spending (short):
This
is a long piece on the failures of EU institutions in managing the 2007-2009
financial crisis; but it is an excellent read:
Politics
Domestic
Obama’s carbon
emissions on His global warming trip (short):
Restricting
civil rights in the name of fighting terrorism (short):
Another thought
on free speech (short):
Quote of the day
(short):
International War Against Radical
Islam
Egypt
on Obama’s foreign policy (video):
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