The Morning Call
8/16/16
The
Market
Technical
The indices
(DJIA 18636 S&P 2190) rose again. While breadth improved, volume remained
quite low. The VIX was up 2 ¼% (unusual
of an up Market day), finishing below its 100 day moving average, within a
short term downtrend but still close to the lower boundary of its intermediate
term trading range (support).
Shorts throw in
the towel (short):
The Dow ended
[a] above rising 100 day moving average, now support, [b] above its 200 day
moving average, now support, [c] within a short term uptrend {17574-19310}, [c]
in an intermediate term uptrend {11316-24143} 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 {2061-2300}, [d]
in an intermediate uptrend {1917-2519} and [e] in a long term uptrend {862-2400}.
The long
Treasury fell 1%, ending above its 100 day moving average and well within very
short term, short term, intermediate term and long term uptrends. However, it remained within the developing pennant
formation---this time near the lower boundary.
GLD rose, ending
above its 100 day moving average and within short term and intermediate term
uptrends. However, last week it failed
at its second try to surmount a key Fibonacci level, then negated a very short
term uptrend. That has me concerned
about our GDX holding.
Bottom line: the
Averages have lifted out of that late July to mid-August trading range. A challenge of the upper boundaries of their
long term uptrend would appear to be an inevitability. That said, I still think
that the pin action in the VIX and the bond, gold, oil and currency markets are
indicating that something is amiss. Be
careful.
Bearish
divergence (short):
Update on who is
buying stocks (medium):
Fundamental
Headlines
Yesterday’s
US economic news remained in the negative: the August NY Fed manufacturing
index was very bad while the August housing index was in line with estimates.
Overseas,
we received yet more proof that QE is nothing more than a central banker wet
dream as the Japanese second quarter GDP and corporate investment were below
forecasts.
Negative
yielding debt now totals $13.4 trillion (medium):
***overnight,
the July UK CPI rose.
In
addition, there was more news (hope) of some sort of new oil production
proposal as the Russians and Saudi’s have agreed to meet. Good luck.
Bottom line: the
good news is that the global economic dataflow remains crappy so central bank
tightening is off the radar. The bad news
is that the global economic dataflow remains crappy and sooner or later
somebody is going to whisper the R word.
I am not sure what that magic word is in algo land; but once it makes
its appearance, look out below.
In the meantime,
sit back and enjoy the part of your portfolio that is invested; but consider
taking some money off the table, either selling a portion of the positions in your
winners or all of your losers or both.
The
latest from John Hussman (medium):
David
Tepper’s latest portfolio moves (short):
Is
the reach for yield morphing into a flight to quality (medium)?
The BIS issues
another blistering report on the negative consequences of artificially low
rates (medium):
My thought for the day. When everyone’s
bullish, it’s hard to sell stocks that have been good to your portfolio,
especially if the allocation of those proceeds will go in to an extremely low
return alternative (cash). To be fair,
there is a reasonable basis for that hesitation. After all, Markets are supposedly efficient;
so it is only natural to think that if cash was such a great investment, everyone
would be buying it. My argument isn’t
that one should be a contrarian for the sake of being at odds with the crowd
bias. Rather it is that there are
benefits to taking profits and redeploying them into unloved assets. To be sure, the timing and price triggers for
rebalancing are extraordinarily opaque---witness the timing of our Sell Half Discipline
in this latest Market run up. But
remember high valuations translate to low future returns and vice versa. History proves that to us time and time
again.
Investing for Survival
How
much do you need to save for retirement?
News on Stocks in Our Portfolios
Home Depot
(NYSE:HD): Q2 EPS of $1.97 in-line.
Revenue of $26.47B (+6.6% Y/Y) in-line
Praxair (NYSE:PX) +3.3% AH following a Dow Jones report that it has held merger talks with
Germany's Linde (OTCPK:LNAGF), in a deal that would create the world’s largest
industrial gas supplier with more than $30B in annual revenue.
Economics
This Week’s Data
The
August housing market index came in at 60, in line.
Month
to date retail chain store sales were much softer than the prior week.
July
CPI was flat, in line; ex food and energy, it rose 0.1% versus expectations of
up 0.2%.
July
housing starts increased 0.2% versus a forecast of a 0.07% decline’ building permits
fell slightly versus an estimate of 0.06% advance.
Other
Total
US consumer debt and its composition (short):
Mexican
labor shortage. Ah, the irony of it all
(medium):
FDIC
slams ‘fortress’ banks’ balance sheets (medium and a must read):
Politics
Domestic
Obamacare
sticker shock (medium):
Onward to social
justice (medium):
Quote of the day
(short):
International War Against Radical
Islam
What a bunch of worthless turds
(medium):
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