The Morning Call
3/23/16
The
Market
Technical
The indices
(DJIA 17582, S&P 2049) dropped slightly, on low volume, mixed breadth and a
fractionally higher VIX. The latter
remains near the lower boundaries of its
short and intermediate term trading ranges.
A close in the 10 to 12 price range would represent a good level for the
purchase of portfolio insurance.
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 {1867-2104},
[d] in an intermediate term trading range {1867-2134} and [e] in a long term
uptrend {800-2161}.
The long
Treasury continued to drift lower, remaining within a very short term downtrend
and below a Fibonacci support level. Nonetheless,
it well within a short term uptrend and above its 100 day moving average.
Bank of America
on the high yield debt market (medium):
GLD rose but
still voided its very short term uptrend for a second time. However, it remains within a short term
uptrend, above its 100 day moving average and a Fibonacci support level.
Bottom line: bulls love it when an overbought market
handles bad news (Brussels attack) with aplomb.
Bull or not, you have to respect that behavior. Momentum is clearly to the upside; so my
assumption remains that the Averages will challenge their all-time highs. I still don’t believe that those boundaries
will be surmounted.
Fundamental
Headlines
Yesterday’s
US economic data turned mixed to positive: month to date retail chain store
sales improved week over week, the March Richmond Fed manufacturing index was
much stronger than forecast while the March flash manufacturing PMI was disappointing.
And just to be
sure that everyone was awake, two Fed officials totally contradicted the
statement from last week’s FOMC meeting and said that economic conditions argue
for higher rates perhaps as soon as April.
You would think that this might have confused investors; but it didn’t because
it is par for the course. These guys are
the ones that are confused and as long as they are, they are going to be
dovish, dovish, dovish.
Central banks
prove Einstein’s theory (medium):
Will
the ECB be forced to buy junk bonds? (medium):
Chaos in the
Japanese bond market (short):
Overseas, the
March EU Markit composite PMI came in better than anticipated; UK inflation was
reported at zero; and German business confidence picked up in March---the
Brussels attack ought to help that.
Still a plus number is an outlier in the EU; so we have to be happy with
what we get.
In other potentially
Market impacting news, Iran said that it might join in an oil production freeze
‘at a later date’ (in other words, after it has ramped up to full production). So nothing really ‘potentially Market
impacting’.
The
price of oil is reaching its limit (medium):
Bottom line: there
was enough bad (Brussels) and confusing (the Fed) news yesterday that if
investors wanted to get pessimistic, they had the excuse. Since the only positive in the investment picture
(in my opinion) is the central bank stampede
to easy money, I am left waiting for either the banks themselves or investors
to read and compute the news of the constant stream of poor global economic stats
and declining corporate profitability. I
have no idea when that magic moment will occur.
Until it does, stocks will remain overvalued.
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.
More
on corporate profits (short):
Under
the category of things to think about---current investor concerns (medium and a
must read):
The
latest from Doug Kass (medium and a must read):
The
latest from John Hussman (medium):
Investing for Survival
Reasoning
in unreasonable circumstances.
News on Stocks in Our Portfolios
Revenue of $4B (-8.0% Y/Y) misses by $80M.
Revenue
of $8.03B (+7.6% Y/Y) misses by $170M.
Economics
This Week’s Data
Month
to date retail chain store sales rose versus the prior week’s reading.
The
March flash manufacturing PMI came in at 51.2 versus estimates of 52.4.
The
March Richmond Fed manufacturing index was reported at 22 versus expectations of
0.
Weekly mortgage
applications fell 3.3% while purchase applications were down 1.0%.
Other
China
is drowning in debt (medium):
Canada
just announced a proposal that would make depositors of a bankrupt bank
creditors and then force them to accept stock (versus their deposit) in a
bail-in.
http://www.zerohedge.com/news/2016-03-22/its-official-canadian-bank-depositors-are-now-risk-bail-ins
Politics
Domestic
Freedom Caucus
rejects republican budget (short):
Pat Buchanan on
beltway republicans (medium):
Quote of the day
(short):
International War Against Radical
Islam
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