The Morning Call
8/5/16
Our number one grandson arrives
today for a weekend visit on his way back to college. No Closing Bell. See you on Monday.
The
Market
Technical
The indices
(DJIA 18352, S&P 2164) did little (Dow down slightly, S&P barely up) yesterday. Volume was nonexistent and breadth was weak. The VIX fell another 3 ½%, closing back below
the lower boundary of its former short term trading range. I remain (confused and) 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 {17465-19201}, [c]
in an intermediate term uptrend {11294-24121} 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 {2046-2285},
[d] in an intermediate uptrend {1915-2517} and [e] in a long term uptrend
{862-2246}.
The long
Treasury rose again, ending above its 100 day moving average and well within
very short term, short term, intermediate term and long term uptrends. However, it remains below the prior lower
high---not what you want to see.
GLD rose slightly,
finishing above its 100 day moving average and within very short term, short
term and intermediate term uptrends. It is still struggling to challenge a key
Fibonacci level.
Bottom
line: the indices still can’t generate
any follow through from Tuesday’s decline, which is another plus in the pin
action of the last couple of weeks. The
technical evidence continues to point to more upside.
That said, I
remain bothered by the simultaneous volatility in the VIX and the bond, gold,
oil and currency markets. Plus the
aggressive action by the Bank of England yesterday was greeted with a
yawn---that’s different. Something seems
amiss.
Fundamental
Headlines
Yesterday’
US economic data was mixed: weekly jobless claims were greater than expected.
June factory orders were down less than anticipated but more than in May. July
retail chain store sales were lousy.
Overseas, there
was no data. But the Bank of England
lowered key interest rates by 25 basis points and adopted a much larger QE bond
buying program than was anticipated. I
wonder if it will work any better than all the other QE’s?
And
it is not like it has been doing nothing (short):
A
different perspective on QE and stock prices (short):
https://www.bondvigilantes.com/blog/2016/08/02/qe-unquestionably-supportive-risk-assets-i-think-not/
***overnight, German factory orders plunged 3.1% while Italian industrial production fell 0.4%,
Bottom line: I was a bit surprised that the investors virtually
ignored the more than expected aggressive monetary moves by the Bank of
England. It is clearly a different reaction
than in prior occurrences. It is tempting
to assume that the central banks are starting to lose their mojo with the
Markets. But to be fair, (1) the BOE has
not been as aggressive user of QE as other major central banks; so I guess that
it could be argued that it has room to run before it ‘catches up’ with its
global brethren and (2) the July nonfarm payroll is due today and that has
always been a much watched indicator which I am sure kept some investors on the
sidelines. Those two factors
notwithstanding, this move is still going to add to pot of global liquidity and
likely assist in the furtherance of asset mispricing and misallocation.
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.’
Earnings season update: two
thirds of the S&P companies have reported; earnings in aggregate are down
2.8%.
Compare
the reported earnings and unemployment data with the actual US Treasury tax
receipts (medium and a must read):
Debt
to EBITDA at record highs (short):
My
thought for the day: Every day you read
economic projections, stock market projections, and individual stock profit
projections. Most of them are presented
to the last cent or last 1/10th of one percent implying great
intellectual rigor. When in fact they have
proven time and time again to be of almost little informational value. Just think of the statistical crap the Fed,
the IMF, the CBOE and brokerage firm after brokerage firm generates daily. By the way, I do not exclude myself from this
company.
That is why our Portfolios are diversified and have
a Price (Stop Loss) Discipline.
Investing for Survival
The
most powerful force in the universe.
News on Stocks in Our Portfolios
Revenue of $1.78B
(-27.9% Y/Y) beats by $170M.
Economics
This Week’s Data
June
factory orders fell 1.5% versus consensus of -1.8%.
July
retail chain store sales were disappointing.
July
nonfarm payrolls rose 255,000 versus expectations of up 185,000.
The
June trade balance was -$44.5 billion versus estimates of -$43.0 billion.
Other
Politics
Domestic
International War Against Radical
Islam
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