The Morning Call
1/13/16
The
Market
Technical
After a roller
coaster ride, the indices (DJIA 16516, S&P 1938) ended with another decent
day. Still, the Dow closed [a] below
its 100 moving average, now resistance, [b] below its 200 day moving average, now
resistance, [c] within a short term downtrend {16927-17665}, [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] below its 100 moving average, now resistance, [b] below its 200
day moving average, now resistance [c] in a short term downtrend {1946-2034},
[d] in an intermediate term uptrend trading range {1867-2134}, [e] a long term
uptrend {800-2161} and [f] still within a series of lower highs.
Volume declined;
breadth improved. The VIX was down 8%,
ending [a] above its 100 day moving average, now support, [b] in a short term,
intermediate term and long term trading ranges.
The long
Treasury jumped 1.25%, closing above its 100 day moving average, now support
and within very short term, short term and intermediate term trading ranges.
GLD declined
ending [a] below its 100 day moving average, now resistance and [b] within
short, intermediate and long term downtrends.
Bottom line: I
noted yesterday that the Averages were oversold, so a bounce was likely---and
that seems to be what is happening. That
said, both indices remain below the lower boundaries of their short term
downtrends and neither is even close to their prior support levels. In other words, prices have a lot of
territory to regain before there is any reason to assume this up move is
anything more than a rebound from an oversold condition.
Fundamental
Headlines
There
were two secondary stats reported yesterday: the December small business
optimism was up slightly while month to date retail chain store sales growth slowed
from the prior week.
Overseas,
the data flow remains disappointing: December UK industrial production fell and
2015 Chinese auto sales grew at the slowest rate of growth in three years. There was some good news---December Japanese
consumer confidence rose slightly. But
the point is---no improvement seen in the global economy.
***overnight,
December Chinese exports rose 2.3% while imports fell 4%.
Bottom line: the
economic numbers didn’t get any better either here or abroad, oil prices
continue to fall and there was another terrorist bombing in Turkey. In my opinion, that is not a back drop
conducive to higher stock prices. Of
course, I have already observed that the average stock has been hammered and
the Averages in no way mirror that performance.
So at least some of the above is reflected in the price of the average
stock.
The question is,
does the average stock ‘price in’ all of the above. My opinion is ‘no’; but I have to be open to
the possibility. That said, 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, I will remain very skeptical.
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’.
Thoughts
on the workability of QE (short):
2008
has already happened in the energy space (short):
The
problem with ‘adjusted EBITDA’ (short):
Economics
This Week’s Data
Month
to date retail chain store sales grew less than in the prior week.
Reversing
last week’s huge declines, weekly mortgage applications rose 21.3% while
purchase applications were up 18%.
Other
Update
on the Baltic Dry Index (short):
Politics
Domestic
Another example
why neither party deserves support (medium):
Quote of the day
(short):
International War Against Radical
Islam
More
on Saudi Arabia and Turkey (medium):
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