The Morning Call
6/10/16
The
Market
Technical
The indices
(DJIA 18985, S&P 2115) rested yesterday as they toy with an overbought condition
but showed little sign of any kind of dramatic reversal. Volume fell again; breadth
strengthened but as noted above it has reached overbought territory. The VIX rose 4% closing within a short term
trading range and below its 100 day moving average.
The Dow ended
[a] above its rising 100 day moving average, now support, [b] above its 200 day
moving average, now support, [c] within a short term trading range
{17498-18726}, [c] in an intermediate term trading range {15842-18295} and [d]
in a long term uptrend {5541-19413}.
The S&P closed
[a] above its rising 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 for the third day, resetting to an uptrend {2077-2300}, [d] in an
intermediate term trading range {1867-2134} and [e] in a long term uptrend
{830-2218}.
The long
Treasury was up, finishing above the upper boundary of its intermediate term
trading range; if it remains there through the close next Tuesday, it will
reset to an uptrend. It also ended above
its 100 day moving average and well within a short term uptrend.
GLD rose again,
ending well above its 100 day moving average and the lower boundary of its
short term trading range.
Bottom
line: even though stocks closed down, it
was not particularly surprising in that they had gotten overbought; so some
retreat was to be expected. Further,
what weakness did occur was pretty puny, witness the S&P resetting to an
uptrend despite being off on the day. So
while the pin action in the VIX remains somewhat confusing, the buyers still clearly
control the board. I think that the
assumption has to be that that the Averages will probably challenge the upper
boundaries of their intermediate term trading ranges and even possibly the upper
boundaries of their long term uptrends.
However, I don’t think that they will be successful.
Fundamental
Headlines
Another
slow day for economic data: weekly jobless claims were lower than expected and
April wholesale inventories and sales were better than forecast. That leaves us on Friday morning before the
opening in the same position as last week---no clear trend in the numbers; but
unlike last week there are only two indicators to be released today and neither
are especially important.
How
much debt did the US incur to support first quarter growth (short)?
Overseas,
the important news wasn’t data (though Japanese machine orders fell
substantially) but the gathering dissent over central bank monetary policy,
i.e. the Japanese opposition party demanded an end to negative interest rates
and Deutsche Bank hammered the ECB and its ‘whatever it takes’ policy. (remember earlier the largest Japanese bank
withdrew as primary dealer of government bonds). At this point, it is too early to tell if
this is the beginning of the decline in central bank credibility. Clearly that would fit my outlook; but we
need more action to know if this trend is real.
Fed
speak---lost in translation (medium):
Bottom line: the central banks are starting to take some
scata from their constituents. While
people like me have been complaining forever, the establishment has played
along with script---at least until now.
This may be nothing more than a temporary fit of pique; but if it
gathers steam, then my long expected ‘emperor’s new clothes’ moment may be upon
us. I have shown beyond a shadow of a doubt that I
have no clue when the current mispricing of assets ends; but I am willing to
wait to avoid getting hammered.
My thought for the day: I harp
constantly on minimizing fees (mutual fund load, advisors fees, commissions,
management fees, performance fees) because they cost you in terms of long term
performance. That is the conclusion of every
study that I have ever seen. Just think
about docking your portfolio 1-3% annually and compounding that over 20 or 30
years. The number is huge. And it is
worse for smaller accounts. Not only are
the fees higher as a percent of the amount of money invested but they tend to
get a lot lower quality of service. Who’s
the client the portfolio manager going to spend time on, one with $10 million
or one with $500,000?
That is why I argue the smaller
individual investor should either have a portfolio of ETF’s (if they want to
play golf and not worry about their investments) or find a simple strategy that
involves a minimum amount of trading (if they want to pay closer attention to
their portfolio). That was the purpose
behind creating the Investing for Survival website---to provide the research
and portfolio strategy help for the small investor and a very low price.
Investing for Survival
The
upside to academic finance (medium):
News on Stocks in Our Portfolios
Economics
This Week’s Data
April
wholesale inventories rose 0.6% versus expectations of up 0.1%; sales increased
1.0%.
Other
Quote
of the day (short):
Are
Brexit fears overblown? (medium):
Politics
Domestic
FBI leaks on the
Hillary email scandal (medium):
International War Against Radical
Islam
Thoughts
on defeating ISIS (medium):
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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