The Morning Call
2/26/16
The
Market
Technical
The indices
(DJIA 16697, S&P 1951) had another very upbeat day on poor volume and mixed
breadth. However, the VIX declined 8%, taking
it below the lower boundary of a very short term uptrend and right on its 100
day moving average. If it stays below
the uptrend through the close today, it will be negated.
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 {16725-17471}, [c] above
the lower boundary of its intermediate term trading range {15842-18295}, [d] in
a long term uptrend {5471-19343}, [e] and has now made a second higher high.
The S&P
finished [a] below its 100 day moving average, now resistance, [b] below its
200 day moving average, now resistance [c] above the lower boundary of its
short term downtrend {1878-1964}, [d] within its intermediate term trading
range {1867-2134}, [e] in a long term uptrend {800-2161}, and [f] has made a
higher high.
The long
Treasury rose, ending [a] within its short and intermediate term trading ranges,
[b] well above its upward trending 100 day moving average and [c] right on the
lower boundary of a very short term uptrend, negating Wednesday’s break.
GLD was up
slightly, remaining within very short term and short term uptrends as well as
above an upward trending 100 day moving average.
And:
Bottom
line: there was no confusion in
yesterday’s pin action. Certainly, on a
price basis, the bulls scored a big initial win. The Averages closed above the upper
boundaries of those very short term trading ranges (15448-16518, 1812-1948)
that I cited yesterday. In addition,
both have set a higher high. I can list a
lot of the ‘buts’; however, that is less important. The key now is holding yesterday’s gains; and
if they do, then we need to start looking to the next resistance levels---which
are now the upper boundaries of Averages short term downtrends.
The
latest from Doug Kass (short):
The
latest from Stock Trader’s Almanac (short):
Fundamental
Headlines
Yesterday’s
US economic stats were negative by volume: January durable goods were much
stronger than expected, weekly jobless claims were up more than estimates and
the February Kansas City Fed manufacturing index fell from its January
number. However, the durable goods data
was by far the most important; so I will count the day as mixed.
Overseas,
January EU inflation came in lower than projected.
Other
news:
(1)
the IMF called for ‘bold’ fiscal action from the G20 [meeting
this weekend] to support demand. Good
luck with that from the US [where nothing is likely till mid-2017], Germany
[barring a turnaround in German attitude] or Japan [which has already
implemented fiscal stimulus---by the way, to no avail].
However, yesterday the Chinese government [likely in anticipation
of the G20 meeting which happens to be in Singapore] said that it would take
significant steps to stabilize the yuan [no more competitive devaluations] and enact
fiscal stimulus. Of course, we all know
these guys lie; but, if they follow through, it would be a plus not just for
the Chinese but also the global economy,
Unfortunately, here is an example of the Chinese
stimulating lending (medium):
(2)
in a CNBC interview, St. Louis Fed head Bullard [a
hawk] said the US economy was just fine BUT reiterated that any further
interest rate hikes would be ‘unwise’.
In short, just more bulls**t Fed double speak, full of sound and fury,
signifying nothing. These guys are
clueless except that they know what they have done hasn’t so far worked but
have no idea what to do next.
(3)
finally, another rumor circulated that OPEC could meet
in March. ‘Could’ being the operative
word. These guys are jerking off the
rest of the world. I wouldn’t be shocked
if they were using their headlines to trade their own sovereign wealth funds.
Returning the world of real events, Whiting Petroleum, the
largest oil producer in North Dakota, suspended all fracking operations. Clearly a sign that the Saudi strategy [drive
high cost producers out of business] is working. It remains to be seen whether this is a one
off event or a sign of things to come.
If the latter and assuming that means that US fracking oil production
will begin to shrink, then it could be a sign of potentially higher prices---depending
on what Iran and Iraq do with their production and the level of demand in a slowing
global economy. My point here is not to make
a prediction but to highlight a factor to watch because it could lead to a
change in the energy industry.
Bottom line: the economic stats, here or abroad, continue
to point to recession, both here and abroad.
There are a couple of factors that investors seem to be focused on short
term that have lifted their spirits:
(1)
the hope for a stabilization in oil prices springing
from the second rumored OPEC meeting in as many weeks [the hope being lower
production/higher prices], complemented by the potential fall in supply
represented by the withdrawal of Whiting Petroleum from its fracking production
in North Dakota.
At the moment, this is little more than a ‘gleam in investors’
eyes’. But, in my opinion, we remain in a period of misguided
elevated investor euphoria. So the
tendency is to price in a positive event [higher oil prices] like it has a 30%
odds of occurring when in reality it is 5%.
Just ask Russia (short):
(2)
the Fed is cooing like a dove; the IMF is calling for
more action to lift demand; the Chinese have responded positively right before
this weekend’s G20 meeting; and if nothing QE happens there, then it can always
occur at the upcoming ECB or Fed meetings. God only knows what this motley collection of
yahoos will do; but I can certainly understand why investors are getting jiggy
ahead of this series of meetings.
But as I said yesterday, ‘In my opinion, more of the same misguided Keynesian claptrap will only
make economic conditions worse. But
given the past relationship between QEInfinity and investor jigginess, hope
will likely continue to spring eternal. If it does, it makes sense to use any rebound
to take some profits in winners that have held up during recent decline.’
At
the risk of injecting reality into all this jubilation, here is an update on
revenues and earnings (medium and not good):
Investing for Survival
Why
bear markets are so painful.
Economics
This Week’s Data
The
February Kansas City Fed manufacturing index was reported at -12 versus January’s
reading of -9.
Fourth quarter GDP came
in up 1.0% versus forecasts of up 0.4%.
The
December US trade deficit was $62.2 billion versus projections of $62.5
billion.
Other
Politics
Domestic
The ten worse
colleges for free speech (medium):
Who pays the
taxes in the US (medium)?
International War Against Radical
Islam
In
the war against radical islam, this is the essence of US policy (short):
The
EU immigration problem appears to be coming to a head (medium):
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