The Morning Call
6/22/16
The
Market
Technical
The indices
(DJIA 17829, S&P 2088) milled around yesterday, apparently investors
sitting on their hands awaiting tomorrow’s Brexit vote. Volume was quite low---not
surprising in a wait and see Market.
Breadth continued to improve. The
VIX was up, finishing well above its 100 day moving average, now support.
The Dow closed
[a] above its rising 100 day moving average, now support, [b] above its rising 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
finished [a] above its rising 100 day moving average, now support, [b] above
its rising 200 day moving average, now support, [c] within a short term trading
range {2037-2110}, [d] in an intermediate term trading range {1867-2134} and
[e] in a long term uptrend {830-2218}.
The long
Treasury fell again, but remained above its 100 day moving average and within
short, intermediate and long term uptrends.
GLD (120.8) declined
2%. While it closed above its 100 day
moving average, it is starting to act squirrelly again. A move to the 118.9 level (which is a key
Fibonacci level as well as that of its 100 day moving average) will likely
prompt me to take some profits in our GDX holding (Aggressive Growth
Portfolio).
Bottom line: intraday
volatility eased a bit yesterday. In the
absence of some stunning statement from Yellen’s second day of testimony, today
will likely be a repeat as everyone seems focused on tomorrow’s Brexit vote. Trading on Thursday and Friday should be
interesting though I have no idea what it might look like. I am still assuming that until the lower
boundaries of the Averages short term trading ranges are successfully
challenged, momentum is to the upside.
Fundamental
Headlines
Yesterday
was another dull day. Only one US
economic stat: month to date retail chain store sales improved. No international economic news either. There was a decision by the German high court
that in essence allows the ECB bond buying program to continue.
The
major headline item was the first day of Yellen’s congressional testimony. In it she worried about everything short of WWIII. But as usual the concerns themselves were
more of the same ‘on the one hand, on the other hand’ horses**t designed to
confuse and confound.
On the one hand,
she is worried about a Brexit, uncertainties facing the US economy, global
turbulence and possible congressional reform of the Fed.
On the other
hand, these two gems:
(1)
high stock valuations [this was spelled out much more
clearly in Yellen’s written report versus her testimony]. Are you kidding me? After spending the last eight years trying to
drive asset prices higher via lower and lower interest rates, now the Fed is
worried about those higher asset prices?
Of course, it is not concerned enough to do the one thing that would
drive asset prices down [i.e. raise interest rates]. Talk
about trying to cover your ass when the hand writing is on the wall---‘but we
said that stock valuations were stretched.
See we really are omniscient’.
(2)
the Fed waiting too long to raise rates (Janet, darlin’,
my two year old granddaughter knows that the Fed has waited too long to raise
rates. Who are you kidding?).
Confused? Probably what she intended.
Yellen’s
testimony:
One thing not
discussed by Yellen or anyone else is the long forgotten focus on base money
which lost its importance when its formulation was changed. That said, it is currently shrinking and that
used to be viewed as a sure sign that the Fed was tightening. (note, base money doesn’t include all those
reserves on bank balance sheets courtesy of QE because those reserves aren’t
being lent). I am not suggesting alarm;
but I do wonder if a shrinking monetary base has no meaning.
Did
the Bank of Japan just join the naysayers of central bank policies? (short):
Will
the ECB be next? (short):
Bottom line: ‘at the moment, all eyes are on the Brexit
vote. So barring a really extraordinary
exogenous event, fundamentals are likely to take a back seat until Thursday. But even if the ‘remain’ vote prevails, the
fundamentals are still lousy.
But no one is
paying any attention to problems in China (medium):
Nonetheless, the overriding circumstance at
this moment is that stocks remain dramatically overvalued even under the most
promising economic/political scenario.
Hence, I continue to believe that this is the moment to sell a portion of
your most successful investments and to get rid of your losers.’
My
thought for the day: in one note last
week, I focused on buying dividend growth---not yield but growth. I also made the point that buying dividend
growth at the right price was an important part of the equation. This article puts some numbers to that
concept. If you are a dividend growth
buyer, this article is an absolute must read:
Investing for Survival
How
the experts behave:
News on Stocks in Our Portfolios
Economics
This Week’s Data
Month
to date retail chain store sales grew at a faster pace than in the prior week.
Weekly
mortgage applications rose 2.9% but the more important purchase applications
fell 2.0%.
Other
Politics
Domestic
The release of
the first hacked document from the Clinton Foundation (medium):
International War Against Radical
Islam
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for Survival’s website (http://investingforsurvival.com/home)
to learn more about our Investment Strategy, Prices Disciplines and Subscriber
Service.
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