The Morning Call
3/10/16
The
Market
Technical
The Market
consolidation process that appeared to start on Tuesday had a very mild follow
through to the upside yesterday with the Averages (DJIA 17000, S&P 1989)
lifting modestly on slightly better volume, but weaker breadth. The VIX
declined 2%, but ended above the upper boundary of a very short term downtrend
for a second day, voiding that trend and very close to its 100 day moving
average.
The Dow 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 a short term
downtrend {16671-17410}, [c] in an intermediate term trading range
{15842-18295}, [d] in a long term uptrend {5471-19343}, [e] and has now made a
third higher high.
The S&P
ended [a] below its 100 day moving average, now resistance, [b] below its 200
day moving average, now resistance [c] within a short term trading range
{1867-2104}, [d] in an intermediate term trading range {1867-2134}, [e] in a
long term uptrend {800-2161} and [f] has now made a second higher high.
The long
Treasury fell slightly, but closed well within its short term uptrend, above
its 100 day moving average and above a key Fibonacci retracement level.
GLD declined
fractionally, remaining in very short term and short term uptrends, as well as
substantially above its 100 day moving average.
GLD is behaving much like TLT, i.e. it is consolidating but in a very
healthy manner.
Bottom line: the
indices recovered yesterday despite being in an extremely overbought
condition. On the other hand, their 100
day moving averages pushed back another challenge. Nevertheless, as I said yesterday ‘given the strong momentum of the recent
rally, it seems likely that those resistance levels will be challenged
again. Whether or not they prove to be
the impenetrable, I still believe that the indices will not set new all-time
highs anytime soon.’
Fundamental
Headlines
Yesterday
was another ho hum day for economic indicators: weekly mortgage and purchase
applications were up but January wholesale inventories were up while sales plunged. Overseas, January UK industrial production
was up.
***overnight,
February Chinese CPI rose 2.3%.
Most important,
Draghi delivered---lower rates, more QE, expanded purchase list. (must read):
And in what only
be described as the biggest one, two punch in QE history, China is proposing a cram
down of its banking system giant portfolio of nonperforming loans (medium and a
must read):
The news was
elsewhere:
(1)
world’s largest oil producers will meet in Moscow on
March 20, generating hopes among investors being that they will agree to some
sort of production cut. Maybe. Many of these guys [Saudi’s, Iranians and
Russians] hate each other, so getting some sort of agreement will be hard. In addition, even assuming there is some sort
of arrangement, they have historical cheated shamelessly in honoring any
quotas. Lastly, if demand falls faster
than supplies are reduced, prices will still have problems sustaining higher
levels.
(2)
Iran threatened to walk away from nuclear deal. Who woulda’ thunk? These assholes never intended to honor it in
the first place and everyone on the global knew that with the exception of a
few ideologues in Washington. That said,
the US probably won’t do anything no matter what Iran does. The Israeli’s are another matter. If the Iranians go through with their threat,
the Middle East geopolitical situation would most likely become a bit dicier.
(3)
Hilsenrath signaled no Fed rate hike next week. I think that is pretty much accepted wisdom
right now. (short):
(4)
New Zealand cut key interest rates, joining the
currency war crowd. To be sure, New Zealand isn’t exactly a global trading
force; but this move will likely help foster the ‘everybody is doing it’
mindset (short):
Bottom
line: major oil producers meeting to
hopefully discuss production cuts and the ECB expected to announce a new
improved version of QE/negative interest rates.
What more could investors ask for?
OK, a pretty girl, a good scotch and Cuban cigar. But you can’t have everything, right? I will tell you one thing. I would be a lot better off getting the
latter than the former because an oil production freeze will get me nothing in
a global recession and QE/negative rates have already proved beyond shadow of a
doubt to be worthless except for the gross misallocation and pricing of
assets.
But in my opinion, the current rally
represents another excellent opportunity to sell a portion of your profitable
investments and sell your losers.
Who
is buying and who is selling (short)?
The
latest from former Dallas Fed chief Fisher (short):
The
latest from Doug Kass (medium):
Investing for Survival
What
are your influences? (medium):
News on Stocks in Our Portfolios
Economics
This Week’s Data
January
wholesale inventories rose 0.3% versus estimates of down 0.1%, unfortunately
sales plunged 1.3%.
Weekly
jobless claims fell 18,000 versus forecasts of down 6,000.
Other
The
problem with tariffs (medium):
More
on student loans (medium):
Politics
Domestic
Thoughts on
political correctness (medium):
International War Against Radical
Islam
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