The Morning Call
2/23/16
The
Market
Technical
The indices
(DJIA 16620, S&P 1945) smoked yesterday, as breadth improved but volume
declined. The VIX was off 6%, ending
right on the lower boundary of a very short term uptrend as well as its 100 day
moving average---so it is on the cusp of becoming much more positive for
stocks.
Speaking of
volatility (short):
The Dow closed [a] below its 100 day moving
average, now resistance, [b] below its 200 day moving average, now resistance,
[c] below the lower boundary of a short term downtrend {16748-17499}, [c] above
the lower boundary of its intermediate term trading range {15842-18295}, [d] in
a long term uptrend {5471-19343}, [e] however, it is now above the last lower
high.
The S&P
finished [a] below its 100 day moving average, now resistance, [b] below its
200 day moving average, now resistance [c] below the lower boundary of its
short term downtrend {1883-1970}, [d] within its intermediate term trading
range {1867-2134}, [e] in a long term uptrend {800-2161} and [f] still within a
series of lower highs but blew the 1928 resistance level.
I checked our
internal indicator last night. The results
as of the close yesterday: the primary trend of each stock in a universe of 142
stocks was (1) 36 uptrends, (2) 58 trading ranges and (3) 48 downtrends. This is negative relative to the indices, but
is actually a stronger showing than I expected.
The long
Treasury was down slightly, ending [a] within
its short and intermediate term trading ranges, [b] well above its upward
trending 100 day moving average and [c] above the lower boundary of a very short term
uptrend.
GLD fell 1.7%, but
remained within very short term and short term uptrends as well as above an upward
trending 100 day moving average.
Bottom
line: the S&P’s negating of its
reset to a downtrend last week was followed yesterday with it closing above the
1928 Fibonacci resistance level, the Dow finishing at its first higher high
since last November and the VIX looking like it could turn positive for stocks. So we are starting to see some challenges on
the upside. On the other hand, the
Averages are extremely short term overbought, volume has not been very
convincing and the pin action in TLT and GLD is hinting that not all investors
are as bullish as the stock boys. There
remains more work to do on the upside before the possibility of a return to
former highs can be considered.
Fundamental
Headlines
Yesterday’s
US economic news was mixed: the January Chicago Fed national activity index was
very upbeat while the February flash manufacturing index was below expectations---the
former was certainly the more important of the two. However, of a more anecdotal nature, the latest
Cleveland Fed financial stress index pointed to market instability.
Overseas, February manufacturing PMI’s joined the US in
negative reads: EU composite PMI hit a fourteen month low, with French and
German readings in negative territory and the February Japanese flash PMI came
in below forecast. So our own outlook continues
to get no help from anyone, anywhere.
***overnight, February German business sentiment declined.
In other news, the Bank of China continued to inject
liquidity into the banking system while the central government stepped up (again)
its threats against the any criticism of the economy or the markets---a sure
sign that somebody is worried.
Bottom line: last Friday’s summation couldn’t say it
better: the sum of economic indicators for the last six months both here and
abroad is discouraging; and this is despite more QE from multiple central banks. Every day I link to articles written by guys who
are smarter and have deeper background on monetary policy than me; and they are
all concerned about the risks associated with unwinding QE. I have extreme
difficulty believing that the Averages, currently only 10% off their all-time
highs, properly reflect the odds of a recession or those risks about which the
aforementioned experts are concerned.
I am not suggesting that investors run for
the hills. But it does make sense to use
the current rebound to take some profits in winners that have held up during recent
decline.
The
latest from Mohamed El Erian (medium):
The
latest from Raoul Pal (medium):
http://www.zerohedge.com/news/2016-02-22/raoul-pal-previews-big-reset-how-kondratieff-winter-unwinds
Investing for Survival
Investing
lessons from behavioral psychology.
News on Stocks in Our Portfolios
Revenue of $21B (+9.6%
Y/Y) beats by $610M
Home Depot (NYSE:HD) declares $0.69/
quarterly dividend, 16.9% increase from prior dividend of $0.59
Economics
This Week’s Data
The
February flash PMI manufacturing index was reported at 51.0 versus estimates of
52.5.
Other
Martin
Feldstein on the economy (short):
Pricing
in a Brexit (medium):
More
fallout from negative interest rates (short):
Japan’s
problem (medium and a must read):
Politics
Domestic
International War Against Radical
Islam
No comments:
Post a Comment