The Morning Call
6/28/16
We leave first thing tomorrow
morning seeking heat relief in the mountains.
Clearly, there is a lot going on.
So I will be paying close attention to the Markets. If I take any
actions in our Portfolios, I will send out a Subscriber Alert. Have a great Fourth of July.
The
Market
Technical
The indices
(DJIA 17140, S&P 2000) had another rough day, though they did finish off
the lows of the day. Volume was high; breadth
terrible. The VIX was down 8%, pretty
unusual on such a big down day. However,
remember it was up 49% on Friday; so it likely just got ahead of itself.
The Dow closed
[a] below its rising 100 day moving average, now support; if it remains there
through the close on Wednesday, it will revert to resistance, [b] below its 200
day moving average, now support; if it remains there through the close on
Thursday, it will revert to resistance, [c] below the lower boundary of its
short term trading range {17498-18726} for the second day; if it remains there
through the close today, it will reset to a downtrend, [c] in an intermediate
term trading range {15842-18295} and [d] in a long term uptrend {5541-19413}.
The S&P
finished [a] below its rising 100 day moving average, now support; if it
remains there through the close on Wednesday; it will revert to resistance, [b]
below its 200 day moving average, now support; if it remains there through the
close on Thursday, it will revert to resistance, [c] below the lower boundary
of its short term trading range {2037-2110}; if it remains there through the
close on Wednesday; it will reset to a downtrend, [d] in an intermediate term
trading range {1867-2134} and [e] in a long term uptrend {830-2218}.
The long
Treasury was up 2 ½% on heavy volume. It
blew through that very key Fibonacci level, setting up a further advance. It remained above its 100 day moving average
and well within very short term, short term, intermediate term and long term
uptrends.
GLD was strong
on big volume. It finished above the
upper boundary of its short term trading range for the second day; if it
remains there through the close today, it will reset to an uptrend. It also ended above the upper boundary of its
intermediate term trading range; if it remains there through the close on
Thursday, it will reset to an uptrend. If all that occurs, the next resistance
level is at the upper boundary of its long term downtrend (140).
Bottom
line: both of the Averages are
challenging multiple support levels. If
these all get confirmed, then the next levels to watch are the lower boundaries
of their respective intermediate term trading ranges (15842/1867). The operative word being ‘if’. It is too soon to be buying.
That said,
stocks are in very oversold territory, so don’t be surprised by a rally near
term. It is not a buying opportunity.
I am still paying
particular attention to GLD because it busted through two major resistance
levels on Friday. We got follow through
yesterday; so the clock is now ticking on a major change in trend.
Fundamental
Headlines
Yesterday’s
US economic data was a mixed lot: the May trade balance was slightly larger
than expected, the June Markit flash services PMI was fractionally higher than
anticipated and the June Dallas Fed manufacturing index was not as bad as had
been forecast.
Overseas,
S&P lowered the UK’s credit rating.
Still
investor focus remains on the implications of the Brexit.
Soros
on the Brexit (medium):
Is
Brexit a hopeful sign (medium)?
A
rumored proposal that appears to be eurocrats response to Brexit (medium):
Bottom
line: the bad news is that nobody has a clue what those implications are. The good news is that the concerns about
Brexit are having an impact on stock valuations---which as you know, our
Valuation Model rate as extremely high.
Nevertheless, there is a long way to go get back to Fair Value. Patience.
I
am very close to adding to our GDX holding.
The
more it hurts, the more you make (medium):
My
thought for the day: I have been bludgeoning
all forms of fee seekers in the investment business as parasites. But I want to take a step back and look at
the other side. In some cases, investors
need a pro: a tax accountant and/or lawyer if the investor has a complicated
income/tax picture or the need for proper estate planning.
In
addition, there are those investors are too busy with their business or would rather
play golf and just don’t want to mess with managing the day to day handling of
their assets. For investors with $1
million or less, a well-diversified portfolio on ETF’s can provide the right combination
of risk/reward at a very inexpensive price.
Larger investors have any number of choices among investment management
firms. But you need to shop around. Pay attention to price and don’t get suckered
by so called proprietary strategies that promise outsized returns. Remember, if the strategy worked that well,
they would be lying on the beach in Bermuda instead of trying to sell you
something.
Investing for Survival
Warning
signs of a bad financial advisor.
News on Stocks in Our Portfolios
Revenue of $287.5M (+13.0% Y/Y) in-line.
Economics
This Week’s Data
The
June Markit flash services PMI was reported at 51.3 versus 51.2 recorded in
May.
The
June Dallas Fed manufacturing index came in at -7.0 versus the -13.8 reading in
May.
The third revision of
first quarter GDP showed growth of 1.1% versus expectations of 1.0%; the GDP
price index was +0.4% versus estimates of +0.6%; corporate profits were -4.3%
versus -3.6% in the second revision.
Other
S&P
downgraded the UK credit rating from AAA to AA.
Just
to brighten your day---John Mauldin’s latest (medium/long):
Politics
Domestic
International War Against Radical
Islam
Visit Investing
for Survival’s website (http://investingforsurvival.com/home)
to learn more about our Investment Strategy, Prices Disciplines and Subscriber
Service.
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