The Morning Call
7/15/16
We are leaving this morning to
visit our daughter and her family. Back
on Monday.
The
Market
Technical
The indices
(DJIA 18506, S&P 2152) advance seems relentless, though volume remains
anemic and the VIX can’t make good on
its challenge of the lower boundary of its short term trading range (after trading below it intraday, then finishing
above it). Breadth was stronger than horseradish.
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 {17250-19000}, [c]
above the upper boundary of its intermediate term trading range {15842-18350};
if it remains there through the close next Monday, it will reset to an uptrend
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
{2011-2250}, [d] above the upper boundary of its intermediate term trading
range {1867-2134} for the fourth day, resetting to an uptrend {1898-2500} and
[e] in a long term uptrend {862-2246}.
The long
Treasury got whacked again (-1.5%), but continued to trade above its 100 day
moving average and well within very short term, short term, intermediate term
and long term uptrends.
GLD fell, ending
above its 100 day moving average and within short term and intermediate term
uptrends.
Bottom
line: the indices have made very short
work of the resistance from the upper boundaries of their short and
intermediate term trading ranges---which, as you know, I had not expected. So technically, we need to shift our focus to
the upper boundaries of their long term uptrends. Since by definition there is no resistance
between here and there, it seems logical that spread will be closed fairly
quickly.
Bears capitulate
(short):
The lack of
volume still bothers me; but at this point, it seems to be irrelevant. I am
also concerned about the short term poor performance of TLT in the midst of a
QE/’helicopter’ money ramp in stock prices.
That said, it (139) has run so far, so fast that it could fall to 131
before it even challenges its very short term uptrend and 125 before it
challenges its short term uptrend. So
technically speaking, my worry is a bit misplaced.
Fundamental
Headlines
The
US economic data yesterday were mixed: weekly jobless claims were lower than
expected; but PPI, both the headline and ex food and energy numbers, were hot,
i.e. a lot higher than estimates. Aside
from not being a positive under almost any scenario, I would think that the PPI
stats would have the Fed seriously reconsidering its ‘no rate increase’
narrative. But it is not; as yesterday three
FOMC members said that there was no hurry in raising rates.
Corporate
bankruptcies set to reach new high (short):
Overseas,
the Bank of England did not lower rates or increase its bond buying facility as
anticipated; however, it threw the QEInfinity crowd a bone, saying it expected
to ease after its August meeting.
***overnight, China
reported second quarter GDP grew at 6.7%, slightly ahead of forecast; but
(medium):
Bottom
line: stocks are very generously valued and likely to get more so. However, wrong it may have been for me to act
on our Sell Half discipline and generate cash in our Portfolios, I believe that
it would be doubly wrong to try to get back in at current price levels. There is nothing to do but sit back and enjoy
the ride.
By
the way, unless something significant occurs that causes me to alter our
Valuation Model, I will do the same thing the next time around. I will also continue to use current prices to
lighten up on stocks that trade into the Sell Half Range.
My
thought for the day: Now is the time to be cognizant of what is called the optimism
bias, which basically means that individuals have subjective confidence in
their own judgments that is measurably greater than their objective accuracy. A great example is that in this day of grade
inflation in our educational system, an abnormally high percentage of students
believe that they are of above average intelligence. Another more relevant illustration, which I
linked to in an article yesterday, is that a majority of money managers believe
that they will produce above average returns (versus their peers) in the coming
year. The laws of mathematics says that neither
of the above are even remotely possible.
In the same
vein, those aforementioned money managers believe that their above average
returns will be not just better than their competitors but will also be above
the historical average annual returns. Maybe they will; and maybe we all live at Lake
Wobegon. But I suggest that this is
especially dangerous thinking when stocks are (1) at all-time highs and (2) 3-4%
away from the upper boundaries of an 84 year uptrend.
Investing for Survival
Benjamin
Graham on financial advisors.
News on Stocks in Our Portfolios
Economics
This Week’s Data
June
CPI rose 0.2% versus expectations of up 0.3%; ex food and energy, it was up
0.2%, in line.
July
retail sales surged 0.6% versus forecasts of up 0.1%; ex autos, they were up
0.7% versus consensus of up 0.3%.
The
July NY Fed manufacturing index came in at .55 versus estimates of 5.00.
Other
The
latest from Lacy Hunt (medium):
Politics
Domestic
International War Against Radical
Islam
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