The Morning Call
7/27/16
The
Market
Technical
The indices
(DJIA 18473, S&P 2169) drifted quietly again yesterday (Dow down, S&P
up). Volume was up a tiny bit and
breadth continued to weaken. The VIX was
up another 1.5%, closing for the second day back above the lower boundary of
its former short term trading range. Two
days hardly represent follow through; but it is a start. I remain unwilling to make a direction call
on this indicator.
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 up, continuing to stabilize.
It ended above its 100 day moving average and well within very short
term, short term, intermediate term and long term uptrends.
GLD was up, remaining
above its 100 day moving average and short term and intermediate term uptrends. However, it finished below the lower boundary
of a very short term uptrend for a second day, negating that trend. Clearly not a plus.
Bottom line: after another very quiet day, my bottom line
is unchanged: ‘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
Yesterday
was big for US economic data: month to date retail chain store sales, June new
home sales (primary indicator), July consumer confidence and the Richmond Fed
manufacturing index were above consensus, while the May Case Shiller home price
index and the July Markit flash services PMI were less than expected. So this week is off to a good start. Not to be repetitious, but an improving US economy
is the only thing out there that could have a potential positive impact on
valuations---but based on the dataflow pattern of the last two years, it is too
soon to let it alter our forecast.
Overseas,
there were no stats; but (1) the G20 wrapped up a meeting, the results of which
were meaningless and (2) the Japanese stimulus plan expected to be put forth on
Friday was leaked in several versions---one more dovish and one less dovish than
has been anticipated. In addition to recommending
‘helicopter’ money to the Japanese, maybe Bernanke also counseled one of our
Fed’s favorite policies---confused the sh*t out of them to mask you own
incompetence. That makes 0 for 2 for the bureaucrats. Today, we get the big daddy of them all---our
own beloved Fed.
Meanwhile,
the Italian banking crisis appears to be coming to a head (medium):
And
things aren’t getting any better at Deutschebank (medium):
However,
Citi’s macro surprise index is surging---so what excuse will Yellen use now?
(short):
Bottom line: despite
two sizeable M&A deals and a decent earnings season to date, equities seem
to have lost momentum. However, (1) they
had reached a very overbought level, so some consolidation is to be expected;
moreover, that consolidation so far has been very mild and (2) many investors have
likely been on the sidelines awaiting today’s end of the FOMC meeting and its
accompanying statement.
Of course, none
of this really matters because stocks are so overvalued. Even assuming the US economy is improving, it
would have to be dramatic to alter our Valuation Model. I 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
latest from John Hussman (medium):
My
thought for the day comes from Charlie Munger: ‘I have said that in my whole
life, I have known no wise person, over a broad subject matter who didn’t read
all the time — none, zero. Now I know all kinds of shrewd people who by staying
within a narrow area do very well without reading. But investment is a broad
area. So if you think you’re going to be good at it and not read all the time
you have a different idea than I do.’”
Investing for Survival
What
is the right asset allocation for young investors?
News on Stocks in Our Portfolios
Revenue of $42.4B
(-14.5% Y/Y) beats by $310M.
Revenue of $931.5M
(+8.3% Y/Y) beats by $16.28M.
C.H.
Robinson Worldwide (NASDAQ:CHRW): Q2 EPS of
$1.00 in-line.
Revenue of $3.3B
(-7.0% Y/Y) misses by $130M
Revenue of $24.8B
(+1.1% Y/Y) beats by $760M
Revenue of $7.67B
(-2.7% Y/Y) misses by $200M
Economics
This Week’s Data
Month
to date retail chain store sales improved from the prior week.
The
May Case Shiller home price index fell 0.1% versus expectations of +0.4%.
The
July Markit flash services PMI came in at 50.9 versus the June reading of 51.3.
June
new home sales rose 3.4% versus estimates of up 1.6%.
July
consumer confidence was reported at 97.3 versus consensus of 96.0.
The
July Richmond Fed manufacturing index came in at 10 versus the prior reading of
-7.
Weekly
mortgage applications fell 11.2% while purchase applications declined 3.0%.
June
durable goods orders dropped 4.0% versus forecasts of -1.3%; ex transportation,
they were off 0.5% versus expectations of plus 0.3%.
Other
GAAP
versus non GAAP earnings (medium):
Quote
of the day from Milton Friedman:
In the international trade area, the language is almost
always about how we must export, and what’s really good is an industry that
produces exports, and if we buy from abroad and import, that’s bad. But surely
that’s upside-down. What we send abroad, we can’t eat, we can’t wear, we can’t
use for our houses. The goods and services we send abroad, are goods and
services not available to us. On the other hand, the goods and services we
import, they provide us with TV sets we can watch, with automobiles we can
drive, with all sorts of nice things for us to use.
The gain from foreign trade is what we import. What we
export is a cost of getting those imports. And the proper objective for a
nation as Adam Smith put it, is to arrange things so that we get as large a
volume of imports as possible, for as small a volume of exports as possible.
This carries over to the terminology we use. When people
talk about a favorable balance of trade, what is that term taken to mean? It’s
taken to mean that we export more than we import. But from the point of our
well-being, that’s an unfavorable balance. That means we’re sending out more
goods and getting fewer in. Each of you in your private household would know
better than that. You don’t regard it as a favorable balance, when you have to
send out more goods to get fewer coming in. It’s favorable when you can get
more by sending out less.
Politics
Domestic
The corporate
state (medium):
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