The Morning Call
7/26/16
The
Market
Technical
The indices
(DJIA 18493, S&P 2168) drifted lower yesterday. Volume fell and breadth weakened. The VIX surprisingly bounced 7%, closing back
above the lower boundary of its former short term trading range. Remember the VIX challenged that trend,
reset, then bounced back the lower boundary, sold off again and now has
regained that level. Bottom line: I don’t
think the break of the short term trading range can be confirmed until there is
sustained follow through.
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 {17343-19093}, [c]
in an intermediate term uptrend {11260-23990} 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 {2030-2269},
[d] in an intermediate uptrend {1907-2509} and [e] in a long term uptrend {862-2246}.
The long
Treasury was down fractionally, though it seems to have stabilized after a
couple of tough weeks. 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 was down 0.7%,
but remained above its 100 day moving average and within very short term, short
term and intermediate term uptrends.
However, it ended below the lower boundary of a very short term uptrend.
In last weekend’s
Closing Bell, I mentioned the potential breakout of the dollar above the upper boundary
of its short term downtrend. Yesterday,
it fell back below that trend line, negating the break.
Bottom
line: like all consolidations in the
recent Market run up, yesterday’s sell off was mild. That said, the recent volatility of the VIX
is a bit confusing and does raise questions over the underlying momentum in
prices. Still, as I noted above, until
the VIX confirms a trend, my assumption remains that stocks are headed for a
challenge of their long term uptrends.
Fundamental
Headlines
One
US datapoint was reported yesterday: the July Dallas Fed manufacturing index fell
less than expected. Overseas, it was a
similar story: June Japanese exports and imports declined but less than forecast
and July German business sentiment declined less than anticipated.
The
G20 meeting is over and I think that I can sum it up in one word: ‘Nothing’.
While
yesterday was slow, as I noted in the Morning Call, this will be a busy week---lots
of earnings reports and the Fed and Bank of Japan meet. Plus the dollar is challenging its short term
downtrend and crude oil is starting to get smacked around again. That doesn’t mean that there will be any
surprises but certainly the potential exists.
Bottom
line: valuation is so overextended, the only reasonable strategy at this point
is use the current strength to pare back your big winners and get rid of any
losers.
Lowering
expectations (short):
The prospects for future dividend
growth (medium):
Don’t do the easy thing
(medium):
My
thought for the day is directed at traders.
It comes from Edwards and McGee:
‘If we can learn
from the charts at what points to buy and under what conditions to sell, we
have acquired the basic machinery for successful trading. On the other
hand, obviously, if your buying and selling are at points which more often than
not result in net losses, then it makes no difference how you divide up your
capital or apply it to the market, for it will be bound to shrink until,
eventually, it has all disappeared.’
Investing for Survival
Ten
decisions that will help you plan for retirement.
News on Stocks in Our Portfolios
Economics
Revenue of C$2.84B
(-9.0% Y/Y) beats by C$580M
Canadian National Railway (NYSE:CNI)
declares C$0.375/share quarterly dividend, in line with previous.
Revenue of $1.05B
(-1.9% Y/Y) beats by $20M
Revenue of $10.34B
(-16.1% Y/Y) beats by $280M
Revenue of $7.67B
(-0.3% Y/Y) misses by $40M
Revenue of $14.87B
(+1.2% Y/Y) beats by $200M.
Revenue of $6.27B (-3.5% Y/Y) in-line
This Week’s Data
The
July Dallas Fed manufacturing index came in at -1.3 versus expectations of
-12.0
Other
Stephen
Roach on free trade (medium):
CEO’s
are overpaid (medium):
Update
on the subprime auto loan market (medium):
Politics
Domestic
Quote of the day
(short):
Peak irony
(short and a must read):
http://www.zerohedge.com/news/2016-07-26/peak-irony-mexico-wants-build-wall-stop-illegal-immigration
International War Against Radical
Islam
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for Survival’s website (http://investingforsurvival.com/home)
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