The Morning Call
8/2/16
The
Market
Technical
The indices
(DJIA 18404 S&P 2170) drifted lower yesterday. Volume fell and breadth continued weak. The VIX rose 5%, remaining below the lower
boundary of its former short term trading range. I remain on the fence on this directional
call.
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 {17412-19158}, [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 {2041-2280},
[d] in an intermediate uptrend {1912-2514} and [e] in a long term uptrend
{862-2246}.
The long
Treasury dropped 1.25%, ending above its 100 day moving average and well within
very short term, short term, intermediate term and long term uptrends; but it
has made a lower high---a sign of a loss of momentum.
GLD was up,
ending above its 100 day moving average and within very short term, short term
and intermediate term uptrends.
Bottom
line: the indices continue to
consolidate in a very narrow trading range, indicating that we are likely to
see more movement to the upside. That
said, I am puzzled by the simultaneous volatility in the VIX and the bond,
gold, oil and currency markets.
Something seems amiss.
The
oil/equity divergence (short):
Fundamental
Headlines
The
US economic data continued last week’s negative trend: while the July Markit manufacturing
PMI was up from the prior month, both the July ISM manufacturing index and June
construction spending (primary indicator) were disappointing.
Overseas,
July Chinese, EU and Japanese manufacturing PMI’s were down. In Italy, their most insolvent bank received
its third bailout in as many years (total E8 billion) and now has to raise
another E5 billion (the bank’s current net worth is E1 billion).
Overnight, July UK construction
activity declined; the Japanese government provided a few more details on the
muddled fiscal program it announced last week,
Bottom line: as
you know, I think the big fundamental question right now is whether last week’s
US economic data was a return to the ten month softening trend or was a hiccup
in the prior month’s stabilization/uptrend.
Yesterday’s stats clearly supported the former, though they hardly
resolved the issue.
On the other
hand, yesterday’s overseas economic numbers are indicating that last week’s slightly
improvement in the global dataflow was an aberration.
Of course, the
real source of Market levitation has been the central banks. Unfortunately, virtually all the major
central banks had the opportunity to ease further last week and didn’t. That potentially sets the Markets up for
another hissy fit, if the data keeps deteriorating and the central banks remain
neutral.
Longer term, my
story hasn’t changed. Stocks are grossly
overvalued. Investors should accept as a
gift the current opportunity to take some money off the table, be it from
banking some profits from winners or getting rid of their losers.
Update
on stock valuation (medium):
The
latest from JP Morgan (medium):
My
thought for the day: we live in a world
in which huge financial institutions have massive research staffs and computer
based quantitative strategies that analyze every nook and cranny of the global
markets in search of the slightest edge in earning risk premia. On a long term basis, that makes it very
difficult not just for you and me but also those same institutions to gain any
advantage in performance.
However,
in spite of that, volatility remains in all asset classes; and that provides the
individual investor an opportunity keep up with the big boys (whose size limits
their flexibility) by remaining well diversified across asset classes and using
that volatility to rebalance (selling assets at the upper end of their
historical valuation range and buying assets at the lower end of their valuation
range).
News on Stocks in Our Portfolios
Kimberly-Clark
(NYSE:KMB) declares
$0.92/share quarterly dividend, in line with previous.
Revenue of $4.5B (-10.2% Y/Y) in-line
Revenue of $16.1B
(-2.7% Y/Y) beats by $270M
Revenue of $5.13B
(-6.7% Y/Y) misses by $190M.
Economics
This Week’s Data
July
Markit manufacturing PMI was reported at 52.9 versus June’ reading of 51.3.
The
July ISM manufacturing index came in at 52.6 versus expectations of 53.2.
June
construction spending was down 0.6% versus an estimated rise of 0.6%.
June personal income rose
0.2% versus forecasts of 0.3%; personal spending was up 0.4% versus consensus
of 0.3%; the price deflator was up 0.1% versus projections of 0.2%.
Other
More
on second quarter GDP (short):
Still
more (short):
The
new housing crisis (medium):
Politics
Domestic
International
Europe’s Brexit hangover (medium):
Here is a thought exercise (short):
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