The Morning Call
7/29/16
The
Market
Technical
The indices
(DJIA 18456, S&P 2170) closed near the flat line again yesterday (Dow down,
S&P up). Volume fell and breadth continued
weak. The VIX was down slightly, closing
for the fourth day back above the lower boundary of its former short term
trading range. If nothing changes today, I am returning the
trend to that trading range.
The Dow closed
[a] above rising 100 day moving average, now support, [b] above its 200 day
moving average, now support, [c] within a short term uptrend {17386-19132}, [c]
in an intermediate term uptrend {11277-24107} and [d] in a long term uptrend
{5541-19431}.
The S&P
finished [a] above its rising 100 day moving average, now support, [b] above
its 200 day moving average, now support, [c] within a short term uptrend {2036-2275},
[d] in an intermediate uptrend {1907-2509} and [e] in a long term uptrend
{862-2246}.
The long
Treasury declined slightly, still ending above its 100 day moving average and
well within very short term, short term, intermediate term and long term
uptrends.
GLD fell, remaining
back above the lower boundary of the former very short term uptrend for the
second day---which it negated on Wednesday.
Like the VIX, I think that we need more follow through to determine
direction. It ended above its 100 day
moving average and short term and intermediate term uptrends.
Bottom line: the equity Market keeps sleeping through a
heavy calendar economic data, earnings reports and central bank meetings---although
to be fair there wasn’t much new in any of this. This pin action is encouraging in that the
current sideways consolidation after a ten percent up move suggests that the
bulls are still in control.
That said, two big
events remain ahead---the Bank of Japan meeting (today and a disappointment;
see below) and the Italian bank ‘stress’ text (tomorrow); so maybe the stock boys
are awaiting news from those proceedings before acting. Further, I am still a bit perplexed because bond,
gold, oil and currency markets are bouncing around. Something seems amiss.
Be careful.
Fundamental
Headlines
For
the second day in a row, the US economic data was universally bad: the June
trade deficit, weekly jobless claims and the July Kansas City Fed manufacturing
index were disappointing.
On
the other hand, the international stats, though meager, continued upbeat:
German and Spanish unemployment fell.
***overnight,
July EU flash inflation rose 0.2%, in line, Italian unemployment rose more than
expected and second quarter French GDP was flat versus a forecast on an
advance.
However,
more important than these latest numbers are two major upcoming events:
(1) today’s
Bank of Japan meeting. In it, it held
rates unchanged and announced only a modest increase in its bond buying
program. This is clearly a
disappointment to those expecting ‘helicopter’ money. Hopefully, it is a sign that the leading
perpetrator of egregiously irresponsible monetary policies has finally figured
out that they haven’t and won’t work.
One has to wonder if Bernanke counselled this move.
(2)
the results of the latest Italian bank new stress test expected
tomorrow (medium):
Bottom line: the
Market has had a lot to digest this week, though much of it held little
surprise, though today’s GDP number and the disappointing BOJ action could
change all that. Keep in mind that we
still don’t know the results of the Italian bank stress test; and we have no
idea about the real consequences of the Brexit; nor do we know what the Catalan
secession vote means. On the other hand,
the Market is priced for perfection and the above is not exactly perfect.
I am confused and
continue to believe that the only reasonable strategy at this point is use the
current strength to pare back your big winners and get rid of any losers.
The
point of no return for QE (medium):
The
duration connection (medium and a must read):
My thought for the day: It is important to remember than no
investment strategy works all the time.
You are simply not going to constantly win. But many investors try to by chasing the
latest Market ‘theme’. Unfortunately, that
has been shown time and time again to lead to consistent underperformance.
It is true that
there are many valid investment strategies; but the key is to focus on the one
that best suits your temperament and then pursue it consistently. Keep in mind that each of these valid
strategies work in the course of a Market cycle but they don’t work all the way
through it.
The good news is
that when your strategy isn’t working, it shakes out the weak minded and serves
to boost your performance by allowing you to buy stocks cheaply in pessimistic
times.
Investing for Survival
Investing
rules from Lance Roberts.
News on Stocks in Our Portfolios
Mastercard (NYSE:MA): Q2 EPS of $0.96 beats by $0.06.
Revenue of $2.7B (+13%Y/Y) beats by $110M.
McDonald's
(NYSE:MCD) declares
$0.89/share quarterly dividend, in line with previous.
Revenue of $57.7B
(-22.1% Y/Y) misses by $2.53B.
United
Parcel Service (NYSE:UPS): Q2 EPS of
$1.43 in-line.
Revenue of $14.63B
(+3.8% Y/Y) misses by $20M
Economics
This Week’s Data
The
July Kansas City Fed manufacturing index came in at -6 versus June’s reading of
+2.
Second quarter GDP was up
1.2% versus expectations of up 2.6%; while the price deflator was up 2.2%
versus estimates of up 1.8% (ooops)
Other
US
home ownership rate at lowest level since 1965 (medium):
The
Atlanta Fed cut its second quarter GDP growth estimate just prior to today’s
data release (short):
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.
No comments:
Post a Comment