The Morning Call
3/22/16
The
Market
Technical
The indices
(DJIA 17623, S&P 2051) kept their winning streak going, though on almost nonexistent
volume. Breadth improved and the VIX (14)
crept ever closer to 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] above the upper boundary of a short term downtrend for
the third day, resetting to 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 for the fourth day, thereby reverting 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}.
Who
is buying stocks (short)?
The long
Treasury backed off, retreating off the upper boundary of a very short term downtrend
and a Fibonacci support level. A sign
that the risk-on trade is not gone quite yet.
GLD declined
back below the lower boundary of its very short term uptrend; so it looks like
the consolidation process isn’t over.
Bottom line: ‘the bulls maintained control despite the
Market being extremely overbought. The indices
keep overcoming resistance levels and pushing ever close toward their all-time
highs. At this point, I have to assume
that those highs will be challenged. That said, I keep reciting technical factor
after technical factor that argue against a successful challenge. I have no reason the change my mind at this
point.’
Fundamental
Headlines
Yesterday’s
economic headlines were disappointing: the February Chicago Fed national
activity index and February existing home sales both missed forecasts
dramatically. However, there are a
number of primary indicators that will be reported this week; so no point in
trying to anticipate the trend of this week’s dataflow.
***overnight,
two Fed speakers suggested that the economic data was sufficiently positive to warrant
a rate hike, possibly as soon as April.
Confused? So are they.
Overseas,
in another example of EU bureaucratic lassitude, Greece and its creditors
decided on an early Easter holiday break from the negotiations on a new bailout
agreement.
***overnight,
the March EU Markit composite PMI came in better than anticipated while UK
inflation was reported at zero; 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); Moody’s put Deutsche Bank on its watch list for a credit
downgrade; and Canadian bank regulators have determined that their banks are
woefully underreserved.
Bottom line: QE
euphoria apparently continues to outweigh the US and global economic dataflow. I assume it is because investors somehow
believe that the most recent round of monetary ease will somehow accomplish
what the previous central bank efforts could not. My concern remains, as it has been for the
last two years, that (1) the global economy is sluggish at best, in recession
at worse (2) QE has, is and will do nothing to improve that condition, but (3)
stocks are a short hair away from peak valuation. I think this situation fraught with risk.
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
How
to be wrong as an investor.
News on Stocks in Our Portfolios
Economics
This Week’s Data
February
existing home sales fell 7.1% versus expectations of down 3.0%.
Other
China’s
debt will only get bigger (short):
Brandolini’s
law or why Yellen is toast (medium):
The
Fed calls its own bluff (medium):
OPEC’s
April meeting (medium):
Politics
Domestic
International War Against Radical
Islam
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