The Morning Call
4/28/16
The
Market
Technical
The indices
(DJIA 18041, S&P 2095) traded in minus territory for most of the day, then closed
narrowly up after the Fed delivered another confusingly dovish FOMC statement.
Volume rose, breadth improved and the VIX continues to look like it has found a
bottom.
And:
The Dow closed
[a] above its 100 day moving average, now support, [b] above its 200 day moving
average, now support, [c] within a short term uptrend {17610-18565}, [c] in an
intermediate term trading range {15842-18295} and [d] in a long term uptrend {5541-19413}.
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 uptrend {2095-2197---notice
how the S&P has followed its lower boundary up the last three days}, [d] in
an intermediate term trading range {1867-2134} and [e] in a long term uptrend
{830-2218 1%}.
The long
Treasury was up on good volume, responding to lowered odds of a June rate
hike. It closed above its 100 day moving
average and a key Fibonacci level as well as within a short term uptrend.
GLD was also up
1%, finishing within in a short term uptrend and above its 100 day moving
average and a key Fibonacci level.
Bottom
line: as expected investors responded
merrily to another dovish Fed statement which likely means the upward momentum
will continue. There is nothing in the
technicals to alter my assumptions: stocks are in heavily congested territory,
so the upward progress will be more plodding but I expect them to challenge
their all-time highs and fail.
Chinese
commodities crash: I am not sure what
this means but it bears watching (too much speculation? lack of economic activity?
both?) (medium):
Fundamental
Headlines
Yesterday’s
economic data turned a bit positive: weekly mortgage and purchase applications
were down but the March trade deficit and March pending home sales
improved. Not much but better than a
sharp stick in the eye.
The slowdown is
consumer driven (medium):
Overseas,
the numbers were mixed: first quarter UK GDP growth slowed but April German consumer
confidence rose.
Overnight,
March Chinese industrial profits were up 10%+, April EU economic confidence
rose slightly, German unemployment declined and (drumroll, please) the Bank of
Japan did NOTHING.
Of
course, the headlines of the day came out of the FOMC meeting’s statement which
was another ‘on the one hand, on the other hand’ (global concerns less,
domestic concerns more) bowl of mush. The
bottom line is that there remains a low probability of a June rate hike (though
the odds did rise fractionally)---which my six year old grandson already
knew. Unless the world economy explodes
to the upside, there is no way the Fed is raising rates in front of the
potentially disruptive Brexit vote.
Still it reassures investors another two months of a worry free Fed
policy. For those who are bored enough
to want to read the statement, the link is here.
Bottom line: the
Fed statement read pretty much as expected; and the BOJ has now stiffed the algos
traders. It will be interesting to see
how much follow through to the downside there is.
The
madness of negative interest rates (medium):
Tuesday
I tried to make a strong case for always having a Stop Loss Discipline in order
to never take a big loss. Today I want
to emphasize the opposite, to wit, don’t buy a stock, unless you are trying for
a big gain. That is the reason that our
Sell Half Discipline is set at or near all-time relative and absolute highs. As long as a stock is bought at or near its
all-time relative and absolute lows and the underlying long term fundamentals
of a company are intact, there is no need to disturb the position---too often
you will be wrong, plus there is the commission costs and taxes. Sure it may take longer than you want to
achieve that all-time high. But in the
meantime, you are still making money.
‘Letting you
profits run’ is also the rationale for only Selling Half of a winning position
once the price objective is achieved---again, as along as the underlying long
term fundamentals haven’t changed. CR
Bard is a perfect example. Our Dividend
Growth Portfolio Bought BCR, it doubled, the Portfolio Sold Half and it doubled
again. To be sure, this is an exception
rather than the rule. But the point is, I
don’t have perfect knowledge. I can’t
control what occurs after a stock hits our Sell Half Price; but I can control
what happens when it does---our Portfolio takes a large profits and then plays
with the House’s money.
A wise investor
once said ‘Amateurs go bankrupt by not taking small
losses. Professionals go bankrupt by taking small gains.’
Investing for Survival
The
what, why and how of quality.
News on Stocks in Our Portfolios
W.W.
Grainger (NYSE:GWW) declares $1.22/share quarterly dividend, 4.3%
increase from prior dividend of $1.17.
Revenue of $873.5M
(+6.6% Y/Y) beats by $27.27M
Exxon Mobil (NYSE:XOM) declares $0.75/share
quarterly dividend, 2.7% increase from prior dividend of $0.73.
Revenue of $3.24B
(+6.9% Y/Y) misses by $30M.
Economics
This Week’s Data
March
pending home sales rose 1.4% versus estimates of up 0.5%.
First
quarter real GDP came in at +0.5% versus consensus of +0.7%; the price index
was up 0.7% versus expectations of up 0.5%.
Weekly
jobless claims rose 9,000 versus projections of up 13,000.
Other
Greece
goes from bad to worse (medium):
Politics
Domestic
International War Against Radical
Islam
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for Survival’s website (http://investingforsurvival.com/home)
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