The Morning Call
3/18/16
The
Market
Technical
The indices
(DJIA 17481, S&P 2040) had another QE euphoria day on improved breadth
though volume was flat. The VIX (14.39) fell
4%, remaining within a very short term downtrend and nearing the lower boundary
of its short term trading range (12.75).
The Dow closed
[a] above its 100 day moving average, now support, [b] above its 200 day moving
average, now support, [c] above the upper boundary of a short term downtrend
{16620-17351}; if it remains there through the close on Monday, it will reset
to a trading range, [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 for a second day, now resistance; if it remains there
through the close next Monday, it will revert to 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 higher, but remained in a very short term downtrend. It continues to be a very modest performance
versus other sectors of the fixed income market, indicating risk-on and not
surprising given the stock market’s performance.
GLD declined
fractionally, closing again above the lower boundary of a very short term
uptrend which it broke Tuesday. I am leaving
that call on hold and awaiting follow through in either direction. In the meantime, it remains well above the
lower boundary of its short term uptrend, as well as its 100 moving
average.
Bottom line: apparently,
every day is Christmas in this new supercharged QE world. Despite modest volume and less than
conclusive breadth, resistance levels continue to be taken out. So the assumption has to be that momentum continues
to the upside. The next targets are the
upper boundaries of the indices’ intermediate term trading ranges which are
within a couple of percent from current price levels. So I am also assuming that they are highly
likely to be challenged.
At the risk of appearing pig headed, I still
believe the technical internals not to mention the fundamentals argue that the
bull market is likely over and that mean reversion is the principal risk right
now.
Fundamental
Headlines
Yesterday’s
US economic data came in mixed: pluses---weekly jobless claims and the Philly
Fed manufacturing index; negatives: fourth quarter US trade deficit and the February
leading economic indicators. There is
only datapoint today; which means that this week is back into the negative
column.
Overseas,
the story was the same: February Japanese exports and imports were atrocious,
the Swiss National Bank lowered its inflation expectation and the Bank of
Norway pushed rates lower and said that it expects to do more.
Bottom
line: none of this matters now because investors are still celebrating the
universal capitulation of central banks to the high priest of QE. I like
a party as much as anyone; so it makes no sense to try to get in the way of
this one. But when it is over, (1) the
globe will still be at or near recession and (2) if this new, industrial sized
QE performs as its predecessors, then it will do nothing to solve (1). The only difference is that equity valuations
will be higher.
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.
Stockman
on the Yellen news conference (medium):
One
more (medium and a must read):
Investing for Survival
The
dilemma of too much choice.
News on Stocks in Our Portfolios
·
Revenue of $1.21B
(-6.2% Y/Y) misses by $10M.
Economics
This Week’s Data
The
February leading economic indicators rose 0.1% versus estimates of up 0.2%.
Other
Update
on the Baltic Dry Index (short):
Politics
Domestic
International War Against Radical
Islam
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