The Morning Call
1/6/16
The
Market
Technical
Very little
follow through yesterday by the indices (DJIA 17158, S&P 2016). The Dow ended [a] right on its 100 moving
average for a second day, which represents support, [b] below its 200 day
moving average, now resistance, [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 has now made yet another lower high.
The S&P
finished [a] below its 100 moving average for a second day, which represents
support; if it remains below this MA through the close today, it will revert to
resistance, [b] below its 200 day moving
average, now resistance, [c] right on the lower boundary of its short term
trading range {2016-2104}, negating Monday’s break, [d] in an intermediate term
uptrend {1998-2791}, [e] a long term uptrend {800-2161}, [f] and in a very
short term trend of lower highs.
Counterpoint
(sort of):
And:
One more opinion
(short):
Volume fell; breadth
improved slightly. The VIX (19.3)
declined 6%, ending [a] right on its 100 day moving average, now resistance, negating
Monday’s upside penetration, [b] within short term, intermediate term and long
term trading ranges.
The long
Treasury dropped, closing below on its 100 day moving average, now resistance,
negating Monday’s upside break. It
remains within very short term, short term and intermediate term trading
ranges.
GLD lifted slightly,
finishing [a] below its 100 day moving average, now resistance and [b] within
short, intermediate and long term downtrends.
Bottom line: despite a weak follow through, many of Monday’s
challenges of key support/resistance levels were negated; that suggests more
upside in the short term. However, longer
term, the continuing development of a topping formation, the numerous Market
divergences and our belief that stocks are very richly valued remain big worries.
Fundamental
Headlines
Yesterday
witnessed a trade off in economic stats: month to date retail chain store sales
improved but December light vehicle sales were a disappointment.
On
the monetary front, ex Dallas Fed chief Fisher made an astonishing mea culpa,
supporting my thesis that the Market is overvalued. (5 minute video and today’s
must watch)
Overseas
China reacted to Monday’s vicious sell off by flooding its banking system with
liquidity; the December EU inflation rate was unchanged though below
expectations.
***overnight,
China devalued the yuan again,
Bottom line: while the recent economic data may not be
getting worse, it clearly is not getting better. As I said yesterday, the best we can hope for
is that the economy is stabilizing at a reduced rate of growth. The global economy remains moribund---which
is not going to help us. And now Dick
Fisher basically admits that Fed policy has led to asset misallocation and
mispricing; mispricing as in Market overvaluation. That overvaluation is in the process of
rupturing internally as divergences multiply.
I am not
suggesting that investors run for the hills.
I am suggesting that they use the Market strength to take some profits
in winners and/or eliminating investments that have been a disappointment.
Valuations
in the emerging markets (short):
Investing for Survival
No
defense for closet indexing:
News on Stocks in Our Portfolios
Economics
This Week’s Data
Month
to date retail chain store sales came in better than the prior week.
December
light vehicle sales were reported at 17.3 million units versus estimate of 18.1
million.
Weekly
mortgage applications fell 27% while purchase applications were down 15%.
The
December ADP private payroll report showed job gains of 257,000 versus expectations
of 190,000.
The
November trade deficit was $42.4 billion versus forecasts of $44.4 billion,
Other
The
impact of minimum wage (short):
How
the middle class is disappearing (short and you won’t believe the reason):
Banks
cutting credit facilities to shale producers (short):
Politics
Domestic
Comments on
Kasich’s record as governor (medium):
Quote of the day
(short):
International War Against Radical
Islam
Saudi
Arabia or Iran (medium):
How about neither?
Will they drag us into a larger Middle
East War?
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