The Morning Call
1/14/16
The
Market
Technical
The indices
(DJIA 16516, S&P 1938) took another beating yesterday, pushing further into
oversold territory. The Dow closed [a]
below its 100 moving average, now resistance, [b] below its 200 day moving
average, now resistance, [c] below the lower boundary of a short term downtrend
{16927-17665}, [c] in an intermediate term trading range {15842-18295}, [d] in
a long term uptrend {5471-19343}, [e] below its August 2015 low and [f] and
still within a series of lower highs.
The S&P
finished [a] below its 100 moving average, now resistance, [b] below its 200
day moving average, now resistance [c] below the lower boundary of a short term
downtrend {1946-2034}, [d] in an intermediate term trading range {1867-2134},
[e] a long term uptrend {800-2161} [f] below its August 2015 low and [g] still
within a series of lower highs.
Volume rose (a
pattern of low volume advances and high volume declines is starting to assert
itself); breadth was lousy. The VIX was up
11%, ending [a] above its 100 day moving average, now support, [b] in short
term, intermediate term and long term trading ranges.
http://www.cnbc.com/2016/01/12/charts-show-strong-bearish-djia-pattern-traders-to-short-rallies.html
And:
The long
Treasury was up another 1%, closing above its 100 day moving average, now
support and within very short term (very near the upper boundary), short term
and intermediate term trading ranges.
GLD increased
ending [a] below its 100 day moving average, now resistance and [b] within
short, intermediate and long term downtrends.
Bottom line: so
much for a bounce from an oversold condition; but now the Averages are in even
deeper oversold territory; hence, I continue to believe that one is coming
soon. That said, the indices, having
closed below their August 2015 lows, may first attempt a challenge of the
15832/1867 level since they are not that far away. Whatever level that bounce comes from, this
Market is ugly enough that the odds of a bear market occurring have grown
substantially.
Fundamental
Headlines
Yesterday’s
economic reports were mixed: weekly mortgage and purchase applications reversed
last week’s terrible numbers, the US Treasury reported a much lower budget
deficit than had been anticipated but the Atlanta Fed January year over year real
GDP growth estimate declined (of course, they are peddling fiction). In addition, the latest Fed Beige Book
reflected the recent Fed happy talk, showing economic growth in all geographic
areas.
Overseas, December
Chinese trade data improved markedly; whether these numbers were manufactured
remains an issue.
At
least one analyst believes that it is not indicative of an improving economy
(medium and a must read):
***overnight, November Japanese
core machinery orders fell 14.4%, the yuan is falling again and terrorists
strike again---this time in Jakarta.
Bottom line: by
volume yesterday’s economic reports were upbeat, though the Fed Beige Book and
the Chinese trade numbers don’t reflect all the other information we have been
getting. Of course, they could potentially
be pointing to a turn in the dataflow.
If so, we will know soon enough. On
the other hand, the Atlanta Fed’s most recent year over year measure of real
GDP growth (which is based on reported data) clearly disputes the Beige Book
which only reflects anecdotal evidence.
Further, (1) oil
prices continue to fall and we are just a week away from Iranian production
coming back on line---which certainly should not provide impetus for higher
prices and (2) speaking of the Iranians [and I wish I weren’t], they keep
poking their finger in our eye and with the aforementioned release of their oil
production as well as the $150 billion of previously frozen assets, their
capacity for mischief grows.
Iran’s propaganda
victory (short):
With the
Averages well above Fair Value, as long as I hear and read about how great the
economy is, how the Fed has nailed the transition to tighter money and how
misleading recent earnings reports have been, this is not a Market in which to
be buying stocks, in my opinion.
I am not
suggesting that investors run for the hills.
I am suggesting that on any rally that (1) they take some profits in
winners that have held up during this decline and/or eliminate investments that
have been a disappointment and (2) they lose the notion of ‘buying the dips’.
Managing
a trend change (medium and a must read):
Great
Market overview from Alhambra Partners (medium):
The
latest from Jeff Gundlach (medium):
ETF Highlight
Nuveen Premium
Income Muni 2 (NPM) seeks current income exempt from regular federal income
tax. The secondary investment objective is the enhancement of portfolio value.
The fund invests
approximately 93% of its assets in bonds and may be considered for investors
seeking a Municipal - National strategy.
NPM has returned an annual rate of 6.10% since inception. More recently,
the fund has generated a total return of 7.25% in the last five years, 4.32% in
the last three years, and 19.18% in the last year. In the last five years, it
has outperformed 58% of its peers. On a year to date basis, NPM has returned
16.90%. Downside risk has been below
average. This fund has a three year standard deviation of 10.3% and has had a
low level of volatility in its monthly performance over the last 36 months. As
NPM is a closed end fund, it has no front end or back end load. The ETF Portfolio owns a full position in
NPM.
Investing for Survival
Examining
‘flaws’ in ETF’s:
News on Stocks in Our Portfolios
Economics
This Week’s Data
The
Atlanta Fed’s January year over year real GDP growth was projected at +1.8%
versus the December reading of +1.9%.
The
December Treasury deficit narrowed significantly (-$14 billion versus -$64
billion).
Weekly
jobless claims rose 7,000 versus expectations of a decline of 2,000.
December
import prices fell 1.2% versus estimates of down 1.4%; export prices declined
1.1% versus consensus of down 0.5%.
Other
The
Fed released its latest Beige Book which provided upbeat analyses from all
districts.
Which
raises the question, who is the Fed talking to because it is not the railroads
(medium):
Politics
Domestic
Thursday morning
humor:
International War Against Radical
Islam
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