The Morning Call
7/13/16
The
Market
Technical
The indices
(DJIA 18347, S&P 2150) remain on a hot streak, though volume has been quite
low and the VIX was up for the second day in a row (unusual for the VIX to rise
on an up Market day). Intraday, it traded
down, touching the lower boundary of its short term trading range (for the
sixth time) and the bounced to finish up on the day. Breadth was strong.
The Dow closed
[a] above rising 100 day moving average, now support, [b] above its 200 day
moving average, now support, [c] above the upper boundary of its a short term
trading range {17498-18167}; if it remains there through the close today, the
short term trend will reset to up, [c] in an intermediate term trading range
{15842-18350} 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 200 day moving average, now support, [c] above the upper boundary of its
short term trading range {2037-2110} for the third day, resetting to an uptrend
{2011-2250}, [d] above the upper boundary of its intermediate term trading
range {1867-2134} for the second day; if it remains there through the close on
Thursday, it will reset to an uptrend and [e] in a long term uptrend
{862-2246}.
Who
is buying stocks? (medium):
The long
Treasury fell 1.6% on heavy volume. But
it continues to trade above its 100 day moving average and well within very
short term, short term, intermediate term and long term uptrends.
GLD also
declined 1.6% also on heavy volume, ending above its 100 day moving average and
within short term and intermediate term uptrends.
Bottom
line: the indices continued their upward
momentum, blasting through multiple resistance levels, though only one break
has been confirmed. Providing something
of a damper on all this joy, volume remained weak and the VIX has risen the
last two days. Confusing the picture
even more is the sharp selloff in bonds and gold. Not that bonds and gold don’t usually retreat
in a strong stock market; they do. But
of late, they have traded up along with stocks; so this reversal raises
questions about a change in outlook of the bond and gold traders. That said, price is truth and the truth is
stocks are challenging their highs.
I have noted
several times that (1) I thought that the Averages would likely challenge the
upper boundaries of their short and intermediate term trading ranges, but (2)
wouldn’t be successful. They are clearly
in the midst of those challenges; success or failure is yet to be determined.
Fundamental
Headlines
Yesterday’s
US economic news continued its positive streak: the June small business
optimism index was slightly higher than estimates, month to date retail chain
store sales were up and May wholesale/inventories were upbeat. If you are looking for a fundamental reason
to get jiggy, improvement in the trend in US economic numbers over the last two
weeks is about the only source I can see.
Update
on big four economic indicators (medium):
For instance,
overseas there has been nothing about which to be positive. Yesterday, the European Economic Commission
lowered its 2017 economic growth forecast for both the EU and the UK.
***overnight, both
June Chinese exports and imports fell, despite the yuan’s recent drift lower;
Japan lowered its outlook for economic growth and inflation while the Bank of
Japan took a page from the Fed’s playbook and issued a series of on again, off
again statements on the likelihood of ‘helicopter’ money.
For instance,
Japan appears poised to embark on a totally new version of monetary
experimentation.
For instance,
the likelihood of contagion from the Italian banking sector is growing.
Bottom line: all
that said, it is pointless to be poor mouthing stocks when they are in the
midst of challenging their all-time highs, especially since it seemed likely
this would happen anyway. If equities do
go on to confirm their rise above those highs, then I will be proven wrong
(that they wouldn’t break to the upside).
However, as I
have oft repeated in these pages, investing is a business of knowing how to be
wrong. One part of our strategy is to
not sell an entire positive in a stock when it trades into it Sell Half Range. That way our Portfolios remains invested no
matter how outrageous valuations get. So
I am half wrong if the stock moves higher after the sale and half wrong when it
returns to Fair Value. But the key is
that I insured that I am not totally wrong and more importantly, have cash when
that return to Fair Value comes. And
that allows me to pay a lesser for a stock than the price for which I sold
(half) it.
Given
the current price levels, it is an excellent opportunity to sell a portion of
your winners and all of your losers.
Investing for Survival
Five
tips for getting started investing in ETF’s.
News on Stocks in Our Portfolios
Cummins (NYSE:CMI) declares $1.025/share
quarterly dividend, 5.1% increase from prior dividend of $0.975
Economics
This Week’s Data
Month
to date retail chain store sales were stronger than in the prior week.
May
wholesale inventories rose 0.1% versus expectations of up 0.2%; however, sales
increased 0.5%
Weekly
mortgage applications rose 7.2% while purchase applications were flat.
June
import prices rose 0.2% versus estimates of up 0.5%; export prices jumped 0.8%
versus forecasts of up 0.3%.
Other
Politics
Domestic
International War Against Radical
Islam
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