The Morning Call
4/20/16
The
Market
Technical
The buyers
remain relentless as the indices (DJIA 18053, S&P 2100) advanced again;
although again volume was weak. Breadth
improved; and the VIX fell as you would expect; though it remained above the
lower boundary of its short term trading range.
It has held this level twice before and is back in the range that offers
value as portfolio insurance. If it
holds above that lower boundary, our Aggressive Growth Portfolio will Add to
its VXX holding.
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 uptrend {17424-18376}, [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] above
the upper boundary of its short term trading range {1867-2081} for the second
day; if it remains there through the close today, the short term trend will
reset to up, [d] in an intermediate term trading range {1867-2134} and [e] in a
long term uptrend {800-2161}.
The long
Treasury fell fractionally, but remains technically quite strong as it closed within
a very short term uptrend, a short term uptrend, above its 100 day moving
average and above a Fibonacci support level.
GLD was up 1%,
ending back above the upper boundary of a very short term downtrend (remember
it did so last week, but failed to hold), above its 100 day moving average and
a key Fibonacci support level.
Bottom line: the
Averages advanced again, and again in the absence of volume and any positive
news. My major technical takeaways
remain: (1) stocks are at a level of heavy congestion and so going is likely to
get a bit tougher, (2) but the technical strength is sufficient to maintain the
assumption that the Averages will challenge their all-time highs.
Who
is selling and who is buying (medium):
Fundamental
Headlines
The
economic data were again downbeat yesterday: March housing starts and building
permits were very disappointing as were month to date retail chain store sales.
Overseas,
the news was a bit more encouraging as German investor confidence rose. Plus anticipation grew that the Bank of Japan
would ease further at its meeting next week as a result of the economic
hardships born of the recent earthquakes.
I am not sure how much easier it can be; but just the prospects seem to
be making investors giddy.
***overnight,
March Japanese exports fell for the sixth month in a row, which
(1)
cast doubt on all the recent upbeat economic news out
of China [one of Japan’s largest trading partners]. Speaking of which:
(2)
raises the odds of more QE coming out of the Bank of
Japan’s meeting next week.
Of
course, our own Fed also gathers next week for another bulls**t discussion
about how the US is doing great but not great enough to offset the problems in
the global economy, so nothing needs to be done. And if history repeats itself, investors will
be even more encouraged.
Bottom line: the
economic stats continue to point to recession.
First quarter revenue and earnings growth have thus far come in pretty
much as expected---which is to say down ~9%.
Not exactly the stuff of higher equity valuations.
However, hope
springs eternal as investors are focused on (1) the Bank of Japan and Fed
meetings next week, apparently expecting more easing from the BOJ and happy
talk from Yellen, and (2) better corporate results in the second, third and
fourth quarters.
While they will
undoubtedly be correct on the former, the latter is a tad iffier. First, unless there is some improvement in
the macro data, I don’t know how expectations for better revenue and earnings
growth can possibly materialize. Second,
remember all those charts that I have linked to in the past couple of years that
showed constantly increasing Street expectations and then the results
constantly deviating to the downside. That
is still occurring (medium and a must read):
You know my take
on the current investment environment: take some profits in stocks that are
near their highs. Don’t sell the whole
holdings; just take your cost out so that you are now playing with House
money.
I also urge
those who just have to ‘play’ to stick very close to things with which you are
familiar. I get questions from investors
that hear about some exotic strategy that is making great returns and want to
jump on board to get a piece of the action.
Don’t. Investing is a very tough
game when you concentrate on those things that you know. When start playing in somebody else’s game,
it makes no sense. Think about going to
Vegas, sitting down a table for a game you have never played before with guys
who have been playing for years. You
wouldn’t do it. So why do the same thing
in the Market? Stick with what you know;
and the most important thing to know is what you don’t know.
The
latest from John Hussman (medium):
The
risks posed by derivatives (medium):
http://www.marketwatch.com/story/why-this-market-rally-looks-like-a-classic-investor-trap-2016-04-14
Mean
reversion (short):
Fraud
in high frequency trading (medium and a must read):
http://www.zerohedge.com/news/2016-04-19/eric-hunsader-financial-system-absolutely-positively-rigged
Investing for Survival
Understanding
the probabilities of winning or losing.
News on Stocks in Our Portfolios
Revenue of $3.72B (-0.5% Y/Y) in-line.
Revenue of $10.28B (-4.0% Y/Y) in-line.
Economics
This Week’s Data
Month
to date retail chain store sales fell dramatically from the prior week.
Weekly
mortgage applications rose 1.3% while purchase applications fell 1.0%.
Other
Saudi’s
going for the kill (medium):
OPEC
and game theory (short):
The
number of publically traded firms have halved (short):
Politics
Domestic
The 9/11
documents are not the only thing the government is hiding (medium):
International War Against Radical
Islam
Uncovering the hidden truths of 9/11
(medium):
Visit Investing
for Survival’s website (http://investingforsurvival.com/home)
to learn more about our Investment Strategy, Prices Disciplines and Subscriber
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