The Morning Call
2/12/16
I promised my wife that I would
help her with her business (she is a florist) this weekend; so I am going to
miss another Closing Bell. Back on
Tuesday (Market is closed Monday).
The
Market
Technical
The indices
(DJIA 15660, S&P 1829) had another high volume, high volatility day, lousy
breadth day of major whackage.
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 {16787-17523}, [c] below
the lower boundary of its intermediate term trading range {15842-18295}; if it
remains there through the close next Tuesday, it will reset to a downtrend, [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 day moving average, now resistance, [b] below its
200 day moving average, now resistance [c] below the lower boundary of its
short term downtrend {1900-1987}, [d] below the lower boundary of its
intermediate term trading range for the fourth day, thereby resetting to a
downtrend {1796-2053}, [e] in a long term uptrend {800-2161} and [f] still within a series of lower
highs.
The long
Treasury was up on huge volume.
Intraday, it traded above the upper boundary of its newly reset short term uptrend
as well as the upper boundary of its intermediate term trading range; however,
it was unable to remain above either.
Nonetheless, it was still a strong performance.
On another huge volume day, GLD was up 4%,
closing [a] above the upper boundary of its short term trading range by a large
enough percentage, that, on a distance basis, it confirmed a reset to an uptrend
and [b] within an intermediate term trading range.
And
(medium):
Bottom
line: the S&P has now reset to an
intermediate term downtrend and the Dow is knocking on the door. This pin action is clearly not good for
stocks. If the DJIA break of its
intermediate term trading range is confirmed 14256/1576 is the next visible support
level and after that 6382/1077. All that
said, stocks are now deep in oversold territory, so a rally is to be expected.
Fundamental
Headlines
Yesterday
was another slow economic data day. Only
one number here: weekly jobless claims dropped more than anticipated.
I
indicated last week that I would likely revise our economic forecast this week;
and so I have. The new figures are:
Real
Growth in Gross Domestic Product -1.25-+0.5%
Inflation
(revised) 0.5-1.5%
Corporate
Profits (revised) -15-0%
Overseas,
the Bank of Sweden took another step into negative interest rate territory,
lowering key rates from -0.35% to -0.5%.
I continue to be amazed over the thought process of global central
bankers, that is to say, I don’t understand how they can pursue a policy (QE)
that hasn’t worked in seven years, then up the ante (negative interest rates)
on a second policy that turns the whole notion of the banking system (borrow
short at low rates [yes, negative rates are low; but the banks can’t impose a
negative rate on deposits for fear of them.
So they have to pay some interest rate to customers while they are also
paying a negative rate to the central bank, which on a relative basis is high] and
lend long at higher rates) and turns it on its head. I just can’t see how this ends well.
More on how
negative interest rates impact both banks and depositors (medium):
Great
five minute video of an interview with a former BIS banker on QE and negative interest
rates.
***overnight,
the EU reported fourth quarter GDP growth of +0.3%; and Greece is failing,
again.
The
other bit of central bank news was Yellen’s second day of congressional
testimony; the only newsworthy item being that she wouldn’t rule out negative
interest rates (see both above and below).
The
Fed’s double fallacy recovery (medium and today’s must read):
The
latest from Jim Grant on the Fed (medium):
Bottom line: one
of the big risks that I discuss every week in the Closing Bell is ‘the potential
negative impact of central bank money printing’. This factor is now raising its ugly head in
the form of investor realization that QE along with the current fad of negative
interest rates haven’t worked, aren’t working and are actually harmful to the
global financial system in particular the EU and Chinese banks. I want to repeat that I don’t think the US
banks will be wounded as badly as they were in 2008/2009. Nonetheless, if one or more major foreign
bank goes toes up, our banking system and our economy will not escape the
fallout.
I am not
suggesting that investors run for the hills.
It is likely too late to sell stocks that have been disappointments. However, there is still room to take some
profits in winners that have held up during this decline.
Global
stocks are on sale (medium):
The
latest from JP Morgan (medium):
Subscriber Alert
While
our Portfolios are set up (lots of cash) to take advantage of lower prices, I
think it is still too soon to begin Buying.
Indeed, I have been avoiding Adding a lot of new stocks to our Buy Lists
to avoid the appearance of looking more optimistic than I have been. However, I think in time to start Adding more
stocks to our Buy Lists---with the caveat that all understand that our
Portfolios are not Buying, just building the wish list.
Investing for Survival
The
great thing about dividends—they grow.
Economics
This Week’s Data
January
retail sales rose 0.2%, in line; ex autos, they were up 0.1%, also in line.
January
import prices declined 1.1% versus expectations of -1.4%; export prices fell
0.8% versus estimates of down 0.6%.
Other
OPEC
will not blink (medium):
Oil
is not just a supply issue (short):
Some
stats on ‘excessive CEO pay’ (medium):
Politics
Domestic
International War Against Radical
Islam
The
latest from George Soros on Russia and the EU (medium):
More Syrian refugee problems for the
EU (medium):
Syrian set to
explode? (short);
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