The Morning Call
2/18/16
The
Market
Technical
The indices
(DJIA 16453, S&P 1926) made a third significant advance in as many
days. Volume fell, breadth improved; and
while volatility declined, it remains within very short term and short term
uptrends and well above a flattening 100 day moving average.
The Dow ended [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 {16779-17507}, [c] above the lower boundary of its intermediate
term trading range {15842-18295}, [d] in a long term uptrend {5471-19343}, [e]
and still within a series of lower highs and but above the lower boundary of a
very short term downtrend.
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 {1894-1979}, [d] sufficiently above the former lower boundary
of its intermediate term trading range {1867-2134}, I am resetting those
boundaries to a trading range as function of the distance element of our time
and distance discipline, [e] in a long term uptrend {800-2161} and [f] still
within a series of lower highs but above the lower boundary of a very short
term downtrend.
How much of this
advance is short covering? (short):
Short term
rebounds (short):
The long
Treasury was down. It ended [a] within
its short and intermediate term trading ranges, [b] well above its upward
trending 100 day moving average but [c] below the lower boundary of a very
short term uptrend; if it closes there today, the trend will be voided.
GLD halted its
recent decline, remaining within very short term and short term uptrends as
well as above an upward trending 100 day moving average.
Bottom
line: the current three day advance has
been strong enough that minor resistance levels (very short term downtrends) are
being successfully challenged. More
important, it has resulted in the voiding of the recent break in the S&P
intermediate trading range. In addition,
if it continues to rise, it is setting up the possibility for the Averages having
made a double bottom at circa 15500/1812.
On the other hand, the trend since May 2015 of a series of lower highs
is still intact though the indices are getting close (S&P 1950) to a
challenge. These levels are what I am watching
on the upside along with the lower boundaries of the intermediate term trading
ranges on the downside.
The
latest from Doug Kass (medium and a must read):
Fundamental
Headlines
Yesterday’s
US economic data were mixed to negative: weekly mortgage applications rose but
the more important purchase applications were down, January housing starts were
down versus expectations of an advance, January PPI was hotter than expected
(an argument for further Fed rate hikes), while month to date retail chain
store sales were slightly better than forecast and January industrial production
was surprisingly upbeat. So stats were
negative by volume but were a wash between the primary indicators (housing
starts and industrial production).
***overnight,
Japanese January exports declined for the fourth month in a row; Chinese
January PPI fell 5.3% year over year (47th month in a row), while
CPI was up 1.8% but below expectations; the Organization for Economic Cooperation
and Development lowered its 2016 global GDP outlook, mentioning Brazil, Germany
and the US as slowing.
The
Fed released the minutes from its January FOMC meeting. As usual, they were a bit confusing if only
because the Fed, itself, is confused.
The bottom line is that the FOMC is concerned about more pronounced
downside risk, especially with regards to the global economy and the securities
markets; but not enough to do anything about it.
***last
night, St. Louis Fed chief Bullard said
that it would be ‘unwise’ to continue raising rates and hinted that more QE
could be forthcoming ‘if needed’.
Here
is a summary as well as the complete text pf the minutes:
http://www.zerohedge.com/news/2016-02-17/fomc-minutes-show-fed-fears-global-financial-economic-risks
And this from Fed
whisperer Hilsenrath (short):
Central
banks face a credibility test (medium):
A
view of Japanese QE (medium and a must read):
Overseas,
Iran said that it would ‘support’ an oil production ‘ceiling’.
More
on oil prices (short):
Bottom line:
nothing in the economic numbers to indicate that the US isn’t heading into
recession though the positive industrial production stat suggests a controlled
rate of decline. Meanwhile, the Fed
continues to demonstrate its ineptness, feigning confusion over the future
course of rate hikes. Explain to me how
smart this group of highly paid academicians are when they kept moving their economic
goal posts (unemployment and inflation) time and again in order to not raise interest
rates and then raise them at virtually the exact moment that the economy is
rolling over or, at least, hitting stall speed.
The good news is that at least we are not Japan or China---yet. Investors may continue to hope that QE or
some equally ill-advised monetary policy will somehow turn economic conditions
around---but it has not worked so far and likely never will.
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.
Investing for Survival
Forget
about how bad everyone else is at forecasting; work on yourself.
News on Stocks in Our Portfolios
CF Industries
(NYSE:CF) -4.4% AH after reporting lower than expected Q4 earnings, hurt by fertilizer prices that
have plunged amid soft grain prices and global overproduction.
CF says its Q4 average selling price for ammonia fell ~18%
Y/Y to $458/ton, while the price of urea ammonium nitrate fell 12.5% to $230/ton;
meanwhile, CF's total operating costs and expenses jumped 50% to $88.3M.
CF says it expects 2016 corn planting to cover
~90.5M acres, a 2.5M acre increase from 2015.
T. Rowe Price (NASDAQ:TROW) declares $0.54/share
quarterly dividend, 3.8% increase from prior dividend of $0.52
Economics
This Week’s Data
Month
to date retail chain store sales rose slightly versus the prior week.
January
industrial production was up 0.9% versus expectations of up 0.4%; however, the
December number was revised down from -0.4% to -0.7%. Capacity utilization came in 77.1 versus
estimates of 76.7.
Weekly
jobless claims fell 7.000.
The
February Philadelphia Fed manufacturing index came in at -2.8 versus forecasts
of -2.5.
Other
Update
on big four economic indicators (medium):
Politics
Domestic
A letter from
former democratic chief economic advisors to Bernie Sanders (short):
International War Against Radical
Islam
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