The Morning Call
2/9/16
The
Market
Technical
The indices
(DJIA 16027, S&P 1853) were whacked big time again yesterday, on high
volume, lousy breadth and no letup in the volatility.
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 {16802-17555}, [c] in an intermediate term trading range
{15842-18295}, [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 {1904-1992}, [d] below the lower boundary of its
intermediate term trading range {1867-2134; if it remains there through the
close on Thursday, it will reset to a downtrend}, [e] in a long term uptrend
{800-2161} and [f] still within a series
of lower highs.
The long
Treasury smoked, ending above the upper boundary of its short term trading
range; if it remains there through the close on Wednesday, it will reset to an
uptrend.
On another huge volume day, GLD was up strong,
closing [a] within a newly reset trading range; in fact, it is very near to challenging
its upper boundary and [b] above the upper boundary of its intermediate term downtrend
for the fourth day, thereby resetting to a trading range. We clearly are witnessing a significant bottom
in GLD.
Bottom line: yesterday’s pin action could have been
pointing to major changes in many markets.
The lower boundary of the S&P’s intermediate term trading range is
being challenged; and as I have pointed out previously, if that challenge is
successful, there is hardly any visible support between 1867 and
1500/1600. Of course, the break hasn’t
been confirmed. Plus the Dow has not yet
challenged its comparable level (15842).
So it is too soon to go full bear mode.
The long Treasury
is challenging the upper boundary of its short term trading range; and the
upper boundary of its intermediate term trading range is not that far away. GLD has blown out its short and intermediate
term downtrends decisively on monstrous volume and is now about to challenge
the upper boundary of its newly reset short term trading range. Our Portfolios
will likely establish a position in gold on any pullback.
Another
down Monday/down Friday (short):
Fundamental
Headlines
There
were no economic data released either here or abroad yesterday. However, there were two notable headlines:
(1)
Chinese currency reserves dropped to a lower level than
expected. There was no reaction there
because the country is shut down for a week in celebration of the Chinese New
Year. The importance of this development
is that lower reserves means less ammo for a country to defend its currency’s
value,
(2)
Saudi Arabia and Venezuela met over the weekend with
many hoping some sort of agreement could be reached on restrained oil production. No such luck.
***overnight,
December German industrial production fell for the second month in a row, the
November reading was revised down from +1.2% to +0.1%; EU sovereign risk spreads
widen.
Bottom line: most investor attention yesterday was still focused
on the employment numbers released last Friday.
I went through my take on those stats in yesterday’s Morning Call, the
bottom line of which, in my opinion, is that they point to recession. Concerns for which would explain much of the
dramatic pin action discussed above.
Deteriorating
liquidity is a Market problem (note that the author equates ceasing to expand
QE with ‘tightening’; so you can imagine the problem if the Fed starts reducing
its bloated balance sheet)
Global
growth slowing (medium):
A
primer on negative interest rates (medium):
Jeremy
Siegel’s mea culpa (short):
Investing for Survival
The
importance of process (like price discipline, valuation model)
Economics
This Week’s Data
The
January small business optimism index was reported at 93.9 versus expectations
of 94.9.
Other
Politics
Domestic
International War Against Radical
Islam
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