The Morning Call
7/12/16
The
Market
Technical
The indices
(DJIA 18226, S&P 2137) continued their winning ways on Monday, though
volume shrank and the VIX was up (unusual for the VIX to rise on an up Market
day). If there is any follow through to
the upside, then it will have failed in its sixth attempt at challenging the
lower boundary of its short term trading range.
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 on Wednesday, the
short term trend will reset to up, [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 200 day moving average, now support, [c] above the upper boundary of its short
term trading range {2037-2110} for the second day; if it remains there through
the close today, it will reset to an uptrend, [d] above the upper boundary of
its intermediate term trading range {1867-2134}; if it remains there through
the close on Thursday, it will reset to an uptrend and [e] in a long term
uptrend {862-2246}.
The long
Treasury fell, breaking with its recent correlation with stocks. 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, ending above its 100 day moving average and within short term and
intermediate term uptrends.
Bottom
line: the indices continued their upward
momentum though volume remained weak and the VIX actually rose yesterday. Further, bonds and gold which have been
following stocks in the current everything is awesome world, sold off. Not a lot; but they still represent cognitive
dissonance.
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
No
US economic data was reported yesterday---it will be a slow week until Friday
when we will get a flood of numbers.
Overseas, June Chinese consumer inflation was up less than expected
while May Italian industrial output was fell.
***overnight,
the European Economic Commission lowered its 2017 economic growth forecast for
both the EU and the UK.
The
real news which seemed to keep investors excited was Bernanke’s visit to
Japan. While we know nothing about what
is being said, rumors are flying that he is there to encourage the Japanese
central bank to institute what has been come known as ‘helicopter’ money (that
is, the central bank directly financing fiscal spending). That notion was supported by Abe’s promise to
institute a ‘new’ stimulus policy, following an election that raised his party’s
representation in parliament. Since
Japan has been the global leader in QEInfinity, ZIRP and deficit spending (‘old’
stimulus policies), Abe doesn’t have many other ‘new’ alternatives for
stimulus. Since no one has ever tried
helicopter money (did someone say Zimbabwe?), I can’t say that it will be a
bust. I can say that QE and ZIRP have
been.
And
(medium):
What
with Brexit and the Italian banks, China has recently slipped out of investor
consciousness. Well, here is an update
on that everything is awesome economy (medium):
And
(medium):
Speaking
of Italy, everything is not awesome (medium):
Bottom line: if
the aforementioned rumors are correct, then it seems that the world is about to
embark on yet another experimental central bank monetary policy. God help us if it achieves the same level of
success as QE and ZIRP.
That said, it seems
that investors are feeling all warm and fuzzy about those prospects; so what do
I know? I do believe that a healthy dose
of skepticism is warranted given the central bank’s track record on new
experimental policies.
Given
the current price levels, it is an excellent opportunity to sell a portion of your
winners and all of your losers.
Getting
nowhere fast (medium):
Why
earnings season is such a joke (medium):
Thoughts
from a bull (medium):
My
thought for the day: think carefully about how you define a ‘safe’
investment. I read and see ads every day
for mutual funds, gold coins, annuities, etc. that are labeled ‘safe’. I remember that my dad once invested in a
vacation development in Mexico because a member of his church said that it was
a great deal and was ‘safe’. It ended in
bankruptcy. Just because someone says an investment is safe, doesn’t make it so,
even if he is a member of your church.
Remember, (1) anyone touting you generally has a financial interest in
you buying; and they usually either don’t know or don’t care whether it is ‘safe’
or not, (2) forget complex investments; if the rationale can’t be explained in
25 words or less, walk away or hire an impartial expert, (3) trust but verify,
(4) if the investment is too good to be true, it probably isn’t.
Investing for Survival
Winning
by hitting singles instead of homers.
News on Stocks in Our Portfolios
Economics
This Week’s Data
The
June small business confidence index was reported at 94.5 versus expectations
of 94.0.
Other
Politics
Domestic
International War Against Radical
Islam
Merkel
admits terrorists entered Germany in ‘refugee flow’ (medium):
http://www.zerohedge.com/news/2016-07-11/merkel-admits-terrorists-were-smuggled-europes-refugee-flow
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