Thursday, March 31, 2016

The Morning Call--The afterglow of a smack down

The Morning Call

3/31/16

The Market
         
    Technical

The indices (DJIA 17716, S&P 2063) had another good day with both resetting very short term uptrends.  Volume remained low but breadth improved.  The VIX (13.5) fell 2%, resetting a very short term downtrend that it voided Monday.  While it remains well below its 100 day moving average and within a short term trading range, it is nearing the 10-12 attractive price range.

The Dow closed [a] above its 100 day moving average, now support, [b] above its 200 day moving average, now support, [c] in a short term a trading range {15431-17758}, [c] in an intermediate term trading range {15842-18295} and [d] in a long term uptrend {5471-19343}.

The S&P finished [a] above its 100 day moving average, now support, [b] above its 200 day moving average, now support, [c] within a short term trading range {1867-2081}, [d] in an intermediate term trading range {1867-2134} and [e] in a long term uptrend {800-2161}. 

The long Treasury fell 1%, but remains above a Fibonacci support level and continues to form a very short term uptrend.  

GLD declined 1 ½ %, trading back below a key support level and re-opening the possibility of more consolidation.

Bottom line:  the bulls remain in control, though the volume and breadth may not be as strong as they would like.  Nonetheless, they drawing closer to the upper boundaries of their recent consolidation range.  My assumption, at this point, is that there is a strong probability that those boundaries will be successfully challenged which would clear the way for a run at their all-time highs.

            IPO market looks like 2009 (short):

    Fundamental

       Headlines

            Yesterday’s economic stats were mixed: weekly mortgage and refi applications were down but the more important purchase applications were up, the March ADP private payroll number was less than expected.  So far this week’s numbers have been mixed to positive; but Friday is a big data day and will likely determine the trend for the week.

            Overseas, Japanese February industrial was down big; and the Asian Development Bank lowered its forecast for Chinese GDP growth for 2016 and 2017.

            ***overnight, March EU inflation declined 0.1%; S&P lowered China’s credit rating and March German unemployment was unchanged from February.

            Bottom line:  the main theme of the day was the wonderment over the Yellen hawk smack down.  What nobody talked about was why she did it and what its practical implications are, to wit, if she is concerned enough about the global economy to aggressively rule out a 25 basis point rate hike, shouldn’t somebody be worried about what that means for corporate profits with stock prices inches from their all-time highs?   

            Yellen’s gamble on inflation (medium):

In my opinion, the current rally represents an excellent opportunity to raise cash reserves by selling either a portion of your profitable investments and/or sell your losers.

    

       Investing for Survival
   

    News on Stocks in Our Portfolios
 
·         Paychex (NASDAQ:PAYX): FQ3 EPS of $0.50 in-line.
·         Revenue of $752.6M (+6.9% Y/Y) beats by $1.4M.
           


Economics

   This Week’s Data

            Weekly jobless claims rose 11,000 versus expectations of up 1,000.

   Other

            US housing is 14% overvalued, so says BofA (medium):

Politics

  Domestic

  International War Against Radical Islam

Putin apparently lied about withdrawing from Syria (medium):

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