The Morning Call
4/5/16
The
Market
Technical
The indices
(DJIA 17737, S&P 2066) drifted lower yesterday on declining volume and
weaker breadth, but still within very short term uptrends. The VIX lifted 8%, but remained in a very
short term downtrend and below its 100 day moving average. However, it is still within striking distance
of the 10-12 price level which offers good value as portfolio insurance.
The Dow closed
[a] above its 100 day moving average, now support, [b] above its 200 day moving
average, now support, [c] back below the upper boundary of its short term
trading range {15431-17758}, negating Friday’s break, [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 {1867-2081},
[d] in an intermediate term trading range {1867-2134} and [e] in a long term
uptrend {800-2161}.
The long
Treasury rose slightly, closing within a very short term uptrend, above its 100
day moving average and above a Fibonacci support level. It continues to strengthen its support base.
GLD declined
again, finishing within a very short term downtrend and below a key Fibonacci
support level and continuing a consolidation process.
Bottom
line: while the indices back off a bit
yesterday, there was little in the pin action to suggest any loss of upward
momentum. My assumption remains that
they will challenge their all-time highs; but they are now in very congested
territory (multiple resistance levels).
So I would expect the momentum of this up move to slow.
Crude
loses key technical support (medium):
Update
on stock performance in presidential election year (short):
Fundamental
Headlines
One
datapoint yesterday: February factory orders declined more than anticipated. This comes on the heels of the Fed’s over-the-weekend
revision of industrial production stats---which gives us two big turds in what
had been a two week improvement in the industrial sector number’s punch bowl. Clearly, this keeps the economic outlook
murky at best and trending toward recession at worse.
***overnight,
the Bank of India lowered key rates, February German factory orders declined,
most major EU countries’ March services PMI declined, a governor of the Bank of
Japan reiterated the potential for further monetary ease.
Bottom line: the economy continues to underperform while
stocks outperform. The nexus of the
conundrum could very well come in the about-to-start quarterly earnings
season. Even if it doesn’t, I believe
that there is very little return to be had in equities from paying today’s prices. If you can’t resist buying, please don’t do
it on margin. You would be asking to get
your head handed to you.
Hopefully, you
will find some value in my admonition to build some cash reserves by (1) selling
a portion of your winners. Their
position size has almost certainly grown to level
larger than is normal for your portfolio (2) and/or getting rid of your losers. If a stock can’t do well in the current
market environment, what do you think will happen if the S&P returns to our
Fair Value [1538]?
David
Stockman on Yellen’s speech (medium and a must read):
The impact of the Bank of
Japan’s negative interest rate policy (medium):
Update
on market valuation (medium):
Investing for Survival
Dividends
beat buybacks.
News on Stocks in Our Portfolios
Economics
This Week’s Data
February
factory orders fell 1.7% versus expectations of down 1.6%.
The
February US trade deficit was reported at $47.1 billion versus estimates of
$46.2 billion.
Other
Politics
Domestic
International
More
on the Greek bailout talks (medium):
ISIS
in Europe (medium):
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for Survival’s website (http://investingforsurvival.com/home)
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