The Morning Call
8/26/16
The
Market
Technical
The indices
(DJIA 18448, S&P 2172) creep lower yesterday on lower volume and
deteriorating breadth. The VIX rose 1%, but
is still below its 100 day moving average and within a short term downtrend. However, it is back above the lower boundary of
its former short term trading range and has now made its third higher low.
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 {17707-19441}, [c]
in an intermediate term uptrend {11333-24160} 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 {2077-2316}, [d]
in an intermediate uptrend {1923-2525} and [e] in a long term uptrend {862-2400}.
The long
Treasury declined again, but closed above its 100 day moving average and well
within very short term, short term, intermediate term and long term
uptrends. However, it has been stalled
since late June.
GLD fell, but ended
above its 100 day moving average and within short term and intermediate term
uptrends. Like TLT, it has gone nowhere
since late June; but it is now near the lower end of that trading range. More important, GDX (Aggressive Growth
Portfolio) has broken a key technical level.
If it fails to recover by the close Monday, I will Sell a portion of
that holding.
Bottom line: as
you know, most Markets have been on hold all week awaiting this magical Fed day. Thankfully, this is about to be
over---whatever Janet says.
Is
the Market ripe for a correction? (medium):
Fundamental
Headlines
Yesterday’s
US economic data were upbeat: weekly jobless claims were better than expected,
July durable goods orders (primary indicator) were very strong and the August Kansas
City Fed manufacturing index remains in negative territory.
Overseas, the
German Info Institute business climate index declined and July Japanese PPI
came in at the highest level in ten months.
***overnight,
the July UK sentiment index rose.
Bottom
line: as of the close last night, the economic data this week has been a wash,
although today will be the biggest reporting day of the week. So there is really no change on the outlook
for the economy. The tone and content of
Yellen’s speech has the potential to alter economic and Market assumptions---if
she does something other than give an hour’s worth of the same old ‘on the one
hand/on the other hand’ narrative followed by an indication that the Fed will
not raise rates. Absent a surprise, the
Market will likely breathe a sigh of relief and leave early for the
weekend.
Hilsenrath,
the Fed whisperer, on the Fed (medium and a must read):
Have
investors already started to tune out the Fed? (medium):
Central
banks own $25 trillion in financial assets (short):
More
on rising Libor rates. Have Markets had
enough of failed central bank policy and are starting to raise interest rates
irrespective of what central banks do? Remember an inverted yield curve is the
historic precursor to recession (short):
My
thought for the day: when I was in the investment banking business, our firm
raised money for small/medium sized companies.
Once we were hired, one of the first things we asked the client to do is
give us a mission statement---preferably in 25 words or less. Once we had that we could measure the
effectiveness of every decision that the company had made and more importantly,
intended to make with the money we raised.
It provided a laser like focus for management decision making.
The
same is true for the investor. Each
investor needs to have an investment policy statement articulating the key reasons why they
investing and what they hoping to gain from their investments. Once they have that it becomes their guide
for keeping their investment portfolio on course to meet its goals.
It
also forces them to consider the specifics for how they intend to meet their
objectives. Clearly, it makes no sense to say ‘I want a
10% annualized return; or I want to retire with $1 million’ and have no plan on
how to accomplish it. So they need to
define (1) the timeframe in which they have to achieve the goal, (2) how much they
have to save and how much return they expect from their portfolio over that
timeframe, (3)
determine the asset allocation required provides that portfolio return, (4)
decide how frequently they will audit their plan/portfolio to verify that they
are on track and, if not, what changes may need to be made to their investment
policy statement.
Investing for Survival
Three
essential points every investors should understand.
News on Stocks in Our Portfolios
Economics
This Week’s Data
The
August Kansas City Fed manufacturing index came in at -4 versus the July
reading of -6.
Revised second quarter
GDP was up 1.1%, in line; the GDP price index rose 2.4% versus expectations of
up 2.2%; corporate profits fell 2.2% versus the prior report of down 2.3%.
The
July US trade deficit was $59.3 billion versus consensus of $63.2 billion.
Other
An
in depth look at the durable goods orders number released yesterday (medium):
Update
on subprime auto loans (medium):
http://www.zerohedge.com/news/2016-08-25/subprime-auto-delinquencies-jump-17-july-net-losses-soar-28
New Saudi oil minister
sounds more hawkish on a production freeze than previously (short):
Politics
Domestic
A round of
applause for the University of Chicago (short):
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.
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